Key points of investment:

The company's main business is R&D, production and sales of high-end metal powder materials for electronics. The products mainly include nano-grade, sub-micron nickel powder, sub-micron grade copper powder, silver powder, silver-coated copper powder, and alloy powder. Among them, nickel powder and copper powder are mainly used in MLCC production, and are widely used in consumer electronics, automotive electronics, communications, industrial automation, aerospace and other industrial fields; silver-coated copper powder products are mainly used to make low-temperature slurries for heterojunction (HJT) batteries in the photovoltaic field.

In 1Q24, the company's net profit to mother was corrected. Thanks to the continued recovery in demand in the downstream consumer electronics market, the company's orders increased further, and the sales product structure improved, 1Q24 achieved revenue of 0.2 billion yuan, an increase of 60.33% over the previous year. According to the company announcement, the net profit of 1H24 is estimated to be 42-58 million yuan, which is expected to increase 149.08% to 243.96% year-on-year.

Continuously adjust strategies to further cultivate small-particle size powders. 1) Focus on R&D and large-scale production of finished powders with small particle sizes below 180 nm, and continuously optimize the mass production process for silver-coated copper powder. 2) Wang Liping, the actual controller and chairman of the company, has more than 20 years of experience in the operation and management of the metal powder materials industry; Dr. Chen Gangqiang, director and general manager of the company, has more than 30 years of experience in metal powder materials research and development.

A profit forecast was added, and the rating was downgraded to an “increase in holdings” rating. We are optimistic about the future progress of the company's powder business, but considering short-term downstream sentiment adjustments, we lowered our 24-year net profit forecast to 0.044 billion yuan (original value 0.45 billion yuan), and added a 25-26 net profit forecast of 0.11/0.18 billion yuan. We selected Tianyue Advanced, a semiconductor materials company with high industry barriers and low domestic penetration rate, as comparable companies. The current 25-year average PE 59x is given the company 25-year PE 59x, with a target market value of 6.2 billion yuan. There is still room for 16% increase compared to the current market value, and adjusted to a “gain” rating.

Risk warning: The analysis in this article is based on all information disclosed by the company. If the information disclosed by the company to the outside world is incomplete and inaccurate, it will affect the relevant conclusions obtained in this analysis. For details, see the Risk Warning section in the main text of the report.