Event: The company released its 2024 semi-annual report. 24 H1 achieved revenue of 24.819 billion yuan (+15.06%) and net profit of 0.169 billion yuan (-20.93%) to mother. 24Q2 achieved revenue of 14.023 billion yuan (+16.94%) and net profit of 0.066 billion yuan (-44.30%) to mother.

The company's revenue continued to grow, and gross margin declined slightly. 24H1 achieved revenue of 24.819 billion yuan (+15.06%) and gross profit margin of 3.40% (-0.34pct). By product: 1) The revenue of copper-based materials was 23.806 billion yuan (+15.17%), and the gross profit margin was 2.39% (-0.48pct). 2) Steel-based materials revenue of 0.348 billion yuan (+1.55%), gross profit margin 3.90% (+2.59pct). 3) High-end equipment and composite materials revenue of 0.665 billion yuan (+19.25%), gross profit margin 39.26% (+1.89pct). Among them, the subsidiary Tianniao Hi-Tech achieved revenue of 0.321 billion yuan (+0.68%); the subsidiary Dingli Technology achieved revenue of 0.322 billion yuan (+36.51%), mainly due to sufficient orders as military production capacity expanded and demand for civilian products increased.

Affected by large fluctuations in copper prices in the first half of the year, the company's profit side was under pressure in the short term. 24 H1 achieved net profit of 0.169 billion yuan (-20.93%) and net profit margin of 0.80% (-0.30 pct). Among them, due to the year-on-year rise in copper prices in the first half of the year, downstream demand was suppressed, and industry competition intensified. The net profit of the subsidiary Chujiang High Precision Copper Strip was 3.5887 million (-86.79%), and the net profit of Chujiang Electric Materials was 2.6261 million (-85.64%), which had a significant impact on the company's net profit returned to mother.

There was an improvement on the company's expense side. The 24H1 company's expense ratio was 3.39%, a year-on-year decrease of 0.18 pct.

Copper strip processing leader actively promotes production capacity increase and industrial chain extension. The capacity utilization rate of the company's advanced copper-based materials sector has remained at 100%. The manufacturing cost advantage is obvious, and the comprehensive cost performance ratio is leading the industry. At the same time, the company actively focuses on project construction, increasing production capacity and extending the industrial chain. The production capacity of the “Green Intelligent Manufacturing High-precision High-Conductivity Copper-based Material Project with an Annual Output of 0.3 Million Tons (Phase I)” was gradually released in an orderly manner, and the subsidiary Anhui Xinhai achieved a significant increase in revenue and profit. The “0.05 million-ton high-precision copper alloy strip foil project”, the “0.06 million-ton high-precision copper alloy rolling belt renovation and expansion project (phase II and III)” and the “high-precision copper alloy wire project with an annual output of 0.02 million tons” are expected to reach the scheduled state of use in December 2024. Subsequent production capacity will gradually be released, which is conducive to increasing the company's performance.

Based on changes in revenue, gross profit margin, and expense ratio in the mid-year report, the 24-25 EPS is adjusted to 0.46 and 0.55 yuan (originally 0.55 and 0.66 yuan), and the additional 26-year EPS forecast is 0.66 yuan. Referring to the 24-year average valuation of comparable companies, the segmented valuation method was used to correspond to the target price of 7.56 yuan to maintain the purchase rating.

Risk warning

The impact of large fluctuations in copper prices on processing costs; production capacity release falls short of expectations; risk of credit impairment due to poor repayment