Wear-resistant spare parts have obvious consumable properties, and declining grade is driving demand growth. Equipment related to mineral processing often frictions with high-hardness ores and is very susceptible to severe wear. High-hardness wear-resistant spare parts need to be used to improve the wear resistance and service life of the equipment. Judging from the longevity, wear-resistant spare parts generally need to be replaced within a few months. Their consumption is directly related to the amount of ore processed, and they have obvious consumable properties. However, as the number of easy to mine deposits and high-grade deposits decreases, mining grades are showing a downward trend, driving an increase in demand for mineral processing spare parts. Taking global copper mining grades as an example, the average fell from 0.79% in 2000 to 0.43% in 2021.

The advantages of rubber composite spare parts are obvious, and multiple factors promote a steady increase in penetration rate. The cost reduction effect of large-scale mineral processing equipment has clearly become a future trend. Compared with small-sized mills of φ6.7 m or more, the electricity consumption per unit processing capacity can be reduced by 22.7%, ball consumption is reduced by 14%, and the unit consumption of wear-resistant materials is reduced by 33%. However, large chemical mills not only require wear-resistant spare parts to have good wear resistance, but also place higher demands on them in terms of impact resistance and fracture resistance. Under this trend, in order to give full play to the advantages of different wear-resistant materials, rubber composite spare parts have appeared. Take the mill liner as an example. The composite liner not only has high elastic deformation of rubber, but also has good dynamic fatigue properties, which can reduce impact wear. Compared with manganese steel spare parts, rubber composite spare parts are easy to install (the φ7.5x3.2m semi-automatic mill cylinder liner is an example, the rubber composite liner replacement time is only 80% of the high manganese steel liner), low energy consumption (taking the φ7.5x3.5m semi-automatic mill in Yinshan beneficiation plant as an example, electricity consumption can be reduced by 0.23 deg/ton using rubber composite spare parts), and low downtime (under different parts and conditions, the service life of rubber composite spare parts is 1.5 to 4 times that of metal spare parts, which can greatly reduce the number of times required per year) Advantages. Therefore, as companies improve technology and expand production of old mines, it is expected that old small-scale machines in beneficiation plants will be phased out and upgraded to larger machines. We believe that the penetration rate of rubber composite spare parts is expected to increase. It is estimated that in 2024, the global copper ore rubber composite spare parts market space alone will exceed 5 billion yuan.

The company built a business system, and new products and overseas layouts welcomed the harvest period. The synergy between the company's businesses is obvious. On the one hand, market acquisition is developed through cost-effective beneficiation equipment, thereby increasing customer stickiness by selling the company's beneficiation spare parts. The perfect product sequence, years of mine field service experience, and in-depth understanding of beneficiation operations also enable the company to have strong beneficiation equipment design and system integration capabilities. The development of this business can also drive the company's sales of beneficiation spare parts and beneficiation equipment. In addition, the company's new products such as ceramic slurry pumps have entered the trial and promotion stage one after another. The global manufacturing layout has been initially completed, and manufacturing plants in Mongolia and Zambia have been put into operation, which has greatly promoted the company's development of local customers.

Investment advice: Considering that the performance of the company's rubber composite spare parts is superior to traditional metal spare parts, the industry penetration rate is expected to further increase with the gradual introduction of new products such as rubber composite liners for mills. Furthermore, with the gradual improvement of the company's global production capacity layout, overseas customer development is expected to accelerate, and overseas revenue is expected to maintain a high increase. We expect the company's net profit to be 0.15, 0.21, and 0.29 billion yuan respectively in 2024-2026, corresponding to the closing price of October 23, PE being 32, 23, and 17 times, covered for the first time, and given a “recommended” rating.

Risk warning: 1) The increase in the penetration rate of rubber composite spare parts falls short of expectations; 2) Mine prosperity falls short of expectations; 3) New product development progress falls short of expectations; 4) Overseas business progress falls short of expectations.