Incident: The company disclosed its 2024 mid-year report, with an increase in revenue and a slight decline in profit. The company's revenue for the first half of 2024 was 0.205 billion yuan, +14.06% year on year; net profit to mother was 36.689 million yuan, -3.25% year over year; net profit after deducting non-return to mother was 33.4536 million yuan, -0.3% year over year.

Downstream precision parts and downstream magnetic materials drive the company's product revenue growth. The company's revenue growth in the first half of 2024 was mainly due to the fact that carbonyl iron powder, soft magnetic powder, atomized alloy powder, and metal injection molding feed all achieved a certain year-on-year increase. On the downstream application side of precision parts, in the fields of consumer electronics, automobiles, hardware, power tools, etc., metal injection molding technology is used to replace traditional forging, casting and other processes to produce precision parts. The advantages of cost, efficiency, and degree of automation are prominent, driving the company's related product revenue growth; on the downstream application side of magnetic materials, demand for integrated inductor products used in consumer electronics, computers and server video cards is increasing. At the same time, with the gradual spread of in-vehicle functions such as smart cabins and assisted driving, there is an incremental demand for integrated iron carbonyl inductors in the field of new energy vehicle electronics, driving incremental demand for integrated iron-carbonyl inductors , Revenue growth for soft magnetic powder series products.

The company is actively promoting the “6000 tons/year carbonyl iron powder series project” and the first phase of the 3,000-ton demonstration line project of the “0.1 million tons/year metal soft magnetic micro-nano split project”. The company is actively promoting the implementation of new quality productivity, raising capital for “a series of product projects with an annual output of 6,000 tons of carbonyl iron powder, etc.” Production capacity is being released in an orderly manner. Key processes are continuously optimized and upgraded, product quality has been steadily improved, and production capacity has basically covered the growing demand for high-quality products in the market. As a wholly-owned subsidiary of the company, Ningxia Yue'an is actively promoting the 3,000-ton demonstration line project of the “0.1 million tons of metal soft magnetic micro-nano powder project”; the project relies on independent R&D and innovative processes and the location advantage of the Ningdong Industrial Park to drastically reduce raw material costs and increase by-product revenue. It is expected to launch cost-effective basic products on the premise of maintaining the high gross margin of carbonyl iron powder products. The main service target is the mid-range downstream application market, which is more sensitive to the price, breaking through the situation where the original products are mainly supplied to high-end customers.

Profit forecasting and valuation. The company's revenue for 24-26 is estimated to be 4.94/0.633/0.901 billion yuan, and net profit to mother is 1.22/0.153/0.258 billion yuan, respectively, corresponding to PE 21.16/16.83/10.01 times, maintaining a “buy” rating.

Risk warning: the company's production capacity expansion falls short of expectations; downstream demand falls short of expectations; the company's costs have risen sharply.