Carbonyl iron powder: Domestic carbonyl iron powder faucet, benefiting from automotive electronics and video card inductor two-wheel drive. There are many downstream applications of carbonyl iron powder, including inductive components, precision parts, power tools, diamond tools, wave-absorbing materials, magnetic fluids, etc. Carbonyl iron soft magnets are deep-processed products. As an excellent material for integrated inductors, they are suitable for scenarios with high performance requirements, high safety requirements, and relatively insensitive prices. Automotive electronics+video card inductors continue to drive demand release. Iron carbonyl powder has barriers such as process flow+safety supervision+material formulation, and global supply is trending towards concentration. As the leading domestic track segment, the advantage of production capacity+product+first-mover is obvious, and the domestic production substitution process is continuously promoted. The company's related production capacity is 5,500 tons in 2023, and the fund-raising project plans to increase by 6,000 tons, which is expected to double.

New cost reduction process for carbonyl iron powder: Cost reduction iron powder targets the incremental replacement+incremental market, and the 0.1 million ton project opens up long-term growth. On the project side, the new process project is expected to produce 0.1 million tons of powder and 250,000 tons of by-products after delivery, which can achieve annual sales revenue of 3.423 billion yuan and net profit of about 0.593 billion yuan. On the technical side, we independently developed a carbonyl iron preparation process using alluvial iron titanite as a raw material to achieve comprehensive cost reduction and efficiency through by-products such as titanium slag, low-purity iron sources, low-cost gas, and low-cost labor. On the market side, carbonyl iron powder has a small particle size, good sintering activity, and high component density. It is expected to replace materials such as electrolytic iron powder, and is expected to meet the replacement demand of 0.051 million tons; the inductance performance prepared by carbonyl iron soft magnets is excellent, and it is expected to achieve an incremental requirement of 0.055 million tons in medium to high frequency and high power scenarios.

Atomized alloy powder: a universal material for consumer electronics, folding screen hinges open a new cycle of demand. As a general purpose powder, atomized alloy powder has various downstream applications, including powder metallurgy, 3D printing, 3C precision parts, inductors, etc. MIM feed is its deep-processing product, suitable for mass production of precision structural parts, and is highly compatible with 3C requirements. Shipments of folding screen phones continue to boom, and hinges are entering the growth cycle as a key component, while opening up MIM incremental space. According to our estimates, the global folding screen MIM hinge market space is expected to reach 24/49/7.5/9.7/10.7 billion yuan in 2023-2027, with a 4-year CAGR of 45.31%. The company has successfully developed 1750 MPa, 1900 MPa and other grades of high-strength steel powder and MIM feed for folding screen phones, which have been used in many mobile phone brands.

Profit forecast and valuation: We predict that the company's net profit for 2024-2026 will be 0.084/0.118/0.181 billion yuan, respectively, and the closing price PE valuation as of September 13, 2024 will be 27/19/13X. We selected Platco New Materials and Dongmu Co., Ltd. as comparable companies. According to Wind's unanimous expectations, the average PE of comparable companies in 2024-2026 was 25/19/15x, respectively. As a leader in domestic carbonyl iron powder, the company's fund-raising projects are expected to contribute to performance growth, reduce costs and open up growth space, and folding screen hinges will open up a new demand cycle for alloy powder. First coverage, giving a “buy” rating.

Risk warning: risk of demand fluctuations; risk of project construction falling short of expectations; risk of fluctuations in raw materials; risk of new business expansion falling short of expectations; risk of deviations in market space estimation.