Event: The company released its 2024 semi-annual report, and 2024H1 achieved revenue of 1.729 billion yuan (+18.05%) and net profit of 0.18 billion yuan (+16.61%) to mother. 24Q2 achieved revenue of 0.93 billion yuan (+10.29%) and net profit of 0.085 billion yuan (-9.63%) to mother.

The foundry alloy sector grew significantly, and gross margin increased steadily. By business: 1) Foundry alloy segment revenue 1.242 billion yuan (+38.00%), gross profit margin 34.50% (+6.33pct). Among them, the subsidiary Hebei Dekai earned 0.362 billion yuan (-28.31%) and net profit of 0.045 billion yuan (-29.69%); the subsidiary Xinlitong earned 0.766 billion yuan (+66.16%) and net profit 0.161 billion yuan (+172.88%). 2) The deformed alloy segment earned 0.33 billion yuan (-6.47%), and the gross profit margin was 23.91% (+7.42pct). 3) The revenue of the new alloy segment was 0.149 billion yuan (-23.71%), and the gross profit margin was 28.85% (-25.50pct). 24H1's comprehensive gross profit margin was 31.90% (+3.23pct), and the period cost ratio was 14.51% (+1.63pct), mainly due to a significant increase in sales and R&D expenses. Thanks to the increase in gross margin, the company's net profit margin increased 2.06 pct year over year to 14.74%.

A number of projects have been put into construction, and the number of projects under construction has increased significantly compared to the beginning of the period. The company's accounts receivable at the end of the second quarter of '24 were $1.711 billion, up 51.76% from the beginning of the period, mainly due to the decline in customer repayments affected by industry conditions. Inventory was 1.841 billion yuan, up 12.61% from the beginning of the period, mainly due to the increase in inventory to lay the ground for new projects and the expansion of business scale.

The project under construction was 0.326 billion yuan, an increase of 210.22% over the beginning of the period, mainly due to large fixed asset investment in the current period.

A leader in the field of high-end and new superalloys, actively promoting the layout of industrial bases. The company is one of the largest producers of high-end and new superalloy products in China. In the past, the company's production of deformed superalloy products mostly adopted a model of social collaboration. In order to better meet future development needs, the company has built and put into operation a forging and ring rolling production base in Deyang City, Sichuan Province. Product conversion is being gradually implemented, and the ability to integrate the production chain of deformed superalloy products and has basically achieved the ability to integrate development and production. As of 24H1, the progress of the first phase of the Deyang Forging Project is 95%, the Aerospace Ring Rolling Pilot Plant Project is 95%, and the Xi'an Blade and (Small) Structural Parts Production Base Project is 80%.

According to deformation, changes in revenue and gross margin of the new alloy sector, and changes in cost ratios and investment income, the EPS for 24 and 25 was adjusted to 0.53 and 0.70 yuan (previous values were 0.81 and 1.12 yuan), and the 26-year EPS was added to 0.90 yuan. Referring to the comparable company's PE 28 times PE in 24 years, the target price was 14.84 yuan, maintaining the purchase rating.

Risk warning

Government subsidies fall short of expectations; risk of falling product prices