The company is a leading enterprise in the aluminum alloy processing industry, and began a new journey of development with the successful listing of Hualian Comprehensive Super Market in 2022. Innovative New Materials is a large-scale modern integrated enterprise covering the production and operation of 3C consumer electronics aluminum profiles, lightweight automotive aluminum profiles, strip foil, aluminum poles and cables, aluminum alloy bars, structural parts, etc. The company's production base covers the four provinces of Shandong, Jiangsu, Inner Mongolia, and Yunnan (autonomous regions) of China and overseas countries such as Vietnam and Mexico. It is one of the largest production and R&D bases for aluminum alloy materials in the world. Among them, the market share of aluminum alloy bars has ranked first in the world for many years. According to data from the China Nonferrous Metals Processing Industry Association, in 2022, the company sold 2.913 million tons of aluminum alloy round ingots, with domestic and global market shares of 10.9% and 8.8% respectively, ranking first, and is a leading enterprise in the aluminum bar industry.
Domestic and international production capacity continues to expand, contributing to performance growth momentum. The company raised no more than 1.5 billion yuan of supporting capital through a private equity offering to fund the company's high-strength and high-toughness aluminum alloy material project with an annual output of 0.8 million tons (phase II) and the Yunnan Innovation lightweight high-strength alloy material project with an annual output of 1.2 million tons (phase II). In 2023, the company started construction of projects such as the “Vietnam 0.1 million ton 3C consumer electronics profile project”, the “lightweight aluminum alloy material project for new energy vehicles with an annual output of 0.32 million tons”, the “annual output of 0.25 million tons of electrical round aluminum rod reconstruction project”, and the “0.2 million ton high-strength energy-saving aluminum alloy wire project”. Continued expansion of domestic and foreign production capacity will further enhance the company's product structure and contribute to performance growth momentum.
The company is Apple's supplier of aluminum alloy materials and is expected to fully benefit from the new consumer electronics hardware innovation cycle led by Apple AI. Aluminum alloy materials are widely used in consumer electronic structural components. Aluminum alloy has excellent heat dissipation performance, and is also less difficult to process and material cost compared to titanium alloys. In the consumer electronics hardware innovation cycle led by Apple AI, end-side AI will continue to enhance the cooling performance requirements of mobile phones. The use of aluminum alloy structural parts is expected to increase, and the company is expected to fully benefit Apple's core aluminum alloy suppliers.
The weight reduction of automobiles has led to an increase in the use of aluminum alloy bicycles, and the company's active deployment of lightweight profile cars is also expected to accelerate growth. The weight reduction of automobiles and the increase in the penetration rate of new energy vehicles are expected to increase the amount of aluminum alloy used in bicycles. The “Energy-saving and New Energy Vehicle Vehicle Technology Route Map 2.0” predicts that the amount of aluminum used for bicycles will reach 250 kg/vehicle and 350 kg/vehicle, respectively by 2025 and 2030. The company has successfully become a partner of many well-known automobile brands and leading Tier 1 suppliers at home and abroad in the field of automobile lightweighting, including BYD, Ningde Era, Xiaomi, Ideal, Mercedes-Benz, BMW, Audi, etc., which is expected to benefit from the trend of automobile weight reduction.
It is deeply involved in Apple's closed loop recycling technology for recycled aluminum, and the continuous improvement of recycled aluminum processing capacity is expected to further increase profits. Apple continues to promote the application of recycled aluminum and continues to use 100% recycled aluminum in the fuselage of various Apple products. The company has had in-depth cooperation with Apple in recycled aluminum for 17 years. With the comprehensive solution of “alloy formulation suggestion+first-class alloy process+closed circuit recycling of aluminum”, it has become the backbone of Apple's establishment of an aluminum closed-loop supply chain. In 2023, the company comprehensively recycled 1.0139 million tons of recycled aluminum, which is the leading level in the industry. It is expected that the construction of 14 intelligent imported recycled aluminum recycling production lines will be completed within 2024, and will have an annual production capacity of 2.05 million tons of recycled aluminum. Increased use of recycled aluminum is expected to further increase profits. The company signed a strategic cooperation agreement with Fulian Industrial, the core supplier of Apple's mid-frame, to carry out strategic in-depth and comprehensive cooperation in 3C consumer electronics profiles, waste aluminum recycling, etc., and deep ties with downstream structural component manufacturers are expected to enhance competitiveness in the recycling process.
Investment advice: The company's revenue for 24/25/26 is estimated to be 87/97.35/107.5 billion yuan, and the company's net profit for 24/25/26 is estimated to be 1.4/2/2.6 billion. Considering that the company's new production capacity in Vietnam released high growth, Apple's core supplier status, and broad scope for automobile growth, the company was given a 25-year 20X PE, corresponding to a market value of 40 billion yuan and a target price of 9.2 yuan/share. For the first time, it was covered and given a “buy” rating.
Risk warning: downstream demand falls short of expectations, production capacity expansion falls short of expectations, consumer electronics ID innovation uncertainty, automobile weight reduction falls short of expectations, risk of abnormal stock trading fluctuations