Description of the event

The company released its 2024 semi-annual report. 24H1 achieved revenue of 1.51 billion yuan, an increase of 14.52% year on year; net profit to mother of 0.311 billion, up 5.16% year on year; net profit after deducting non-return to mother 0.272 billion, a decrease of 8.16% year on year. Of these, 24Q2 achieved revenue of 0.831 billion, up 12.94% year on year and 22.45% month on month; net profit to mother was 0.163 billion, down 6.82% year on year and up 10.02% month on month; net profit after deducting non-return to mother was 0.145 billion, down 17.65% year on year and up 13.38% month on month.

Incident comments

The company's revenue achieved steady growth, and the share of finished parts increased or reflected the smooth delivery of products such as titanium alloys. By product, revenue from basic materials was 0.571 billion yuan, accounting for 37.85% (47.20% in 23); revenue from aviation parts was 0.729 billion yuan, accounting for 48.32% (44.18% in 23); revenue from non-aviation finished parts was 0.163 billion yuan, an increase of 31.5% over the full year of 23, reflecting a significant increase in non-aviation business orders; processing services business was 0.036 billion yuan.

Or due to a short-term slowdown in the delivery pace of high-margin products, overall gross margin fluctuates due to changes in the product structure. By product, the gross margin of finished aviation parts increased by 5.5 pcts to 37.97% compared to the full year value of 23, the gross margin of basic materials decreased by 7.89pcts to 23.64% compared to the full year value of 23, the gross margin of non-aviation finished parts decreased by 3.35 pcts to 11.89% compared to the full year value of 23, and the gross margin of processing services decreased by 0.85 pcts to 12.56% compared to the full year of '23.

The stability of contract liabilities under normal delivery reflects the continuous signing of new orders, and the high inventory level reflects the company's active preparation for production.

The final contract debt of 24H1 was 0.041 billion yuan, a decrease of 0.002 billion yuan compared with the beginning of the period; the inventory book value was 1.221 billion yuan, a decrease of 0.023 billion yuan compared with the beginning of the period. The book value of raw materials/in-products/inventory goods/issued goods was 2.55/0.475/0.104/0.387 billion yuan, respectively, compared with the beginning of the period, +0.65/-0.002/-0.049/-0.037 billion yuan respectively Yuan. The company's inventory is comparable to the level at the beginning of the period. Under normal product delivery, the company actively prepares raw materials, etc., to prepare for the increase in downstream demand.

The high level of projects under construction reflects the trend of capacity expansion, and fund-raising projects can be expected to continue to upgrade production lines. The balance of projects under construction at the end of 24H1 was 0.122 billion yuan, an increase of 0.01 billion yuan compared to the beginning of the period. The investment progress of the aviation high-performance elastomer materials and parts industry project in the fund-raising project was 33.48%, which is expected to be completed in December '26; the investment progress of the aviation transparent parts development/pilot line project is 1.66%, which is expected to be completed in May '26; the large airliner windshield project is expected to be completed in July '25; the high performance high temperature master alloy product project for aero engines and gas turbines is expected to be 26 Completed in March; the investment progress of the aerospace titanium alloy heat treatment and precision machining process upgrade project is 4.46%, and it is expected to be completed in November '25. Before the fund-raising project was put into operation, the company began rapidly expanding production capacity to meet booming demand through measures such as leasing plants and purchasing equipment.

We expect the company to achieve net profit of 0.71/0.91/1.21 billion yuan in 2024-2026, with year-on-year growth rates of 24%/28%/32%, respectively, and corresponding PE 31/24/18 times, respectively.

Risk warning

1. The risk that the asset injection process of Zhenjiang Titanium Alloy Company falls short of expectations; 2. The risk that the superalloy grade development and finalization process falls short of expectations.