Incident: The company disclosed its 2024 semi-annual report. Revenue increased, and net profit to mother declined slightly. The company's revenue for the first half of 2024 was 0.545 billion yuan, +5.38% year over year; net profit to mother was 47.3654 million yuan, -1.40% year over year; net profit after deducting non-return to mother was 44.9057 million yuan, -1.28% year over year. The company's revenue increased in the first half of 2024, and net profit to mother declined slightly.

The company's product structure continued to be optimized in the first half of 2024. In the first half of 2024, the company continued to expand into high-end materials and high-end markets, and continuously stepped up new product development and product structure adjustments, increasing the share of high-end high-temperature corrosion-resistant alloy materials such as cobalt-based and nickel-based by 17.61% compared to the same period last year. The company continues to increase investment in precision machining equipment and personnel to deliver finished castings and forgings to high-end customers such as GE, Emerson/Fisher, Flowserve, and Schumberger, enhancing the company's profitability.

The demand for civil superalloys in China has broad prospects. China's high-temperature corrosion-resistant alloy industry is growing rapidly. In addition to being widely used in military and aerospace, civil superalloys are widely used in many fields such as steam turbines, petroleum, chemicals, nuclear power, new energy, automobiles, ships, and core components of high-end equipment. The number of workers in China's superalloy industry is small. Although enterprises have developed rapidly in recent years, they still have a large gap between supply and demand. According to data from Beijing Yanjing Bizhi, China's superalloy market reached about 22 billion yuan in 2021, an increase of 15.8% over the previous year. It is predicted that the size of China's superalloy market will rise to more than 30 billion yuan by 2025. In the future, as the production technology of China's superalloy manufacturers continues to improve, high-end superalloy products will gradually reduce their dependence on imports, and the development prospects of the superalloy industry will be broader.

The subsidiary Jiangsu Xinzhongzhou saw a sharp increase in profits. The company's subsidiary Jiangsu Xinzhongzhou achieved operating income of 342.5328 million yuan in the first half of 2024, up 11.95% year on year; operating profit of 21.3033 million yuan, up 56.29% year on year; and net profit of 18.0275 million yuan, up 32.96% year on year. The main reason for the increase in Jiangsu Xinzhongzhou's performance is that Jiangsu Xinzhongzhou has strengthened its market development efforts, further optimized its product structure, and further increased the share of high-end high-temperature corrosion-resistant alloy products such as cobalt-based and nickel-based products.

Profit forecast: In the future, as industry demand grows, the company's newly built production capacity will continue to be released. The company's 2024-2026 revenue is expected to be 1.341/1.623/1.845 billion yuan, respectively, and net profit to mother is 0.11/0.154/0.199 billion yuan, respectively, corresponding to PE 21.70/15.56/12.06 times, maintaining a “buy” rating.

Risk warning: The company's production capacity construction progress fell short of expectations; the price of raw materials for the company's products fell beyond expectations; the company's market development progress fell short of expectations.