The company released the “2024 Semi-Annual Report”. During the period, it achieved operating income of 0.716 billion yuan, an increase of 21.04% year on year; realized net profit due to mother 0.046 billion, a year-on-year decrease of 20.26%; and realized net profit after deduction of 0.039 billion yuan, an increase of 10.33% year on year.

Excluding the impact of share payments, profits grew rapidly, and overseas revenue increased significantly. The company achieved operating income (0.716 billion, +21.04% year over year), mainly due to rapid growth in the sales scale of the company's superalloy products during the reporting period; net profit attributable to the parent company (0.046 billion, -20.26% year over year) was mainly affected by factors such as increased share payment expenses and a decrease in government subsidies to achieve net profit deducted from mother (0.039 billion, +10.33% year over year). It should be clarified that after excluding the impact of share payment fees, net profit attributable to mother was 67.6114 million (+17.42% YoY), and net profit not attributable to mother was 60.6167 million (+71.84% YoY). Looking at a single quarter, Q2 achieved revenue of 0.4 billion (Yoy +14.44%, Qoq +26.29%) and realized net profit of 0.018 billion yuan (Yoy -42.53%, Qoq -33.98%).

By business: 1) High-temperature corrosion-resistant alloy business: Achieved revenue of 0.511 billion yuan (+31.88% year over year) in the first half of the year, and gross margin reached 17.24%, up 1.05 pct from the full year of '23. 2) Alloy pipe business: In the first half of the year, revenue was 0.161 billion (+4.35% year over year), and gross margin reached 8.13%, up 1.31 pct from the full year of '23. By region: 1) Domestic: Achieved revenue of 0.572 billion (+6.69% YoY), gross margin was 12.44%, down 2.12pct from the full year level in '23; 2) Overseas: Achieved revenue of 0.144 billion (+159.35% YoY), with gross margin of 28.24%, up 5.27pct from the full year level of '23.

Gross margin increased year-on-year, and the fee segment was mainly affected by share payments. In terms of profitability, the company's gross sales margin was 15.62%, up 0.04pct year on year. Management expenses (0.041 billion, +127.53%), mainly due to increased share payments, depreciation and amortization expenses; sales expenses (0.013 billion, +26.05%), mainly due to the company's active market development and increase in sales and sample expenses during the reporting period; financial expenses (-0.015 billion, the same period last year -0.015 billion), mainly due to a decrease in interest income; R&D expenses (0.032 billion, +8.46%), mainly This is due to the company's continuous investment in technology research and development and the introduction and verification of new products, and the increase in R&D expenses. The cost rate for the three items was 5.44%, an increase of 3.24pct over the previous year. The company's overall net sales margin was 6.41%, a year-on-year decrease of 3.32pct.

It is one of the core suppliers of superalloys, with a comprehensive layout of two aircraft, civil products and international markets. The company began to lay out the superalloy business in 2015. Cast superalloy master alloys first, and deformed superalloys opened up a wider space.

Market development: Comprehensive layout of dual aircraft, civilian products and international markets, the international market is expected to achieve rapid growth. 1) Domestic market: ① Domestic military aerospace sector: introduction and assessment of multiple grades of cast and deformed superalloys; ② Civil aviation: has entered the Yangtze River series engine product supplier selection catalogue; ③ Domestic combustion engine sector: The company supplies multiple gas engine hot end component suppliers in batches. 2) International market: Accelerate layout, make full efforts to introduce world-renowned aviation, gas engine, oil and gas industry customers, and achieve rapid international business growth. Among them, in the field of international civil aviation, the company has carried out supplier admission and review work with a number of internationally renowned engine companies, supplied batches to Rollo's global forging suppliers, and also cooperated with Safran, Honeywell, and Collins Aerospace. The company's Singaporean subsidiary SINGDA SUPERALLOY PTE.LTD obtained a registration certificate on June 16, 2024, and has not carried out daily business during the reporting period.

Technical side: At the leading level in the country. The company's technology for casting superalloy master alloys and deformed superalloys is at the leading level in China, and can produce deformed superalloys using the internationally mature and advanced domestic “vacuum sensing+electroslag remelting+vacuum self-consumption” triple melting process.

Production capacity side: High production capacity fully prepares for demand volume. According to the company announcement, the company has a total production capacity of 8,000 tons of high-temperature corrosion-resistant alloys, including 3,000 tons of cast superalloys and nickel-based corrosion-resistant alloys, and 5,000 tons of deformed superalloys.

Profit forecast: The decline in the company's year-on-year growth rate in the first half of the year was mainly due to a year-on-year increase in equity payment expenses. The company's net profit for 2024/2025/2026 is expected to be 0.09/0.136/0.178 billion yuan, corresponding to the valuation 33/22/17 times. After excluding the impact of equity payment fees, net profit forecasts to mother are 0.121 billion, 0.148 billion and 182 million yuan, respectively. Corresponding to the valuation 25/20/16 times, maintaining “strong” Recommended” ratings.

Risk warning: Risk of market development falling short of expectations and price fluctuations of raw materials.