Event: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 0.807 billion yuan, +1.31% year on year; net profit to mother 0.073 billion yuan, -5.96% year over year; net profit after deducting non-return to mother 0.07 billion yuan, +0.19% year over year. With 2024Q3, the company achieved revenue of 0.262 billion yuan, -6.24% YoY, -12.65%; net profit to mother 0.025 billion yuan, -13.42% YoY, -20.72% month-on-month; net profit of 0.025 billion yuan after deducting non-attributable net profit of 0.025 billion yuan, +2.95% YoY and -17.39% month-on-month.

Volume: Production and sales were basically the same year on year, and the product structure continued to be optimized. In 2024, the company continued to expand into high-end materials and high-end markets. Sales of high-value-added products for high-end customers grew steadily. High-end high-temperature corrosion-resistant alloy materials such as 24H1 cobalt-based and nickel-based increased 17.61% compared to 23H1. The company also increased delivery services for finished products such as castings and forgings to high-end customers such as Emerson and Baker Hughes, greatly enhancing the company's profitability. At the same time, since the profit level of the overseas market is significantly superior to that of the domestic market, the company is actively expanding the export market, and the share of export business continues to increase. On the demand side, demand performance in the nuclear power, offshore, and new energy sectors was relatively good, while demand performance in the auto parts sector was poor.

Price: Nickel-cobalt prices declined month-on-month, and the cost of high-priced raw materials dragged down gross profit margins slightly. The company's gross margin for the first three quarters of 2024 was about 20.12%, +1.08pct year on year, 20.25% gross margin for 24Q3, +1.25pct year on year, and -1.55pct month-on-month. The average price of 2024Q3 nickel was about 0.1297 million/ton, -8.91% month-on-month, -21.55%; the average price of cobalt was 0.1792 million yuan/ton, -18.86% month-on-month, or -34.92% year-on-year.

On a month-on-month basis, gross profit decreased by 6.65 million yuan month-on-month due to the month-on-month decline in the price of raw materials, net profit to mother decreased by 6.65 million yuan. Profit deductions mainly include: gross profit (-12.31 million yuan), expenses and taxes (-1.69 million yuan), other income, etc. (-1.76 million yuan); profit increases mainly include impairment losses (+6.92 million yuan), and income tax (+2.05 million yuan).

On a year-on-year basis, non-recurring profit and loss dragged down profits. Net profit to mother decreased by 3.94 million yuan year-on-year. The deductions mainly include: gross profit (-0.02 million yuan), expenses and taxes (-1.74 million yuan), other income, etc. (-5.43 million yuan), non-operating income and expenditure (-0.05 million yuan), and income tax (-1.38 million yuan); profit increases mainly include impairment losses (+4.68 million yuan).

Project progress: The company's Jiangsu Xinzhongzhou Phase II project began trial production in August and has now been put into operation normally; the main plant construction of the Phase III project workshop has been completed, the installation of infrastructure such as water and electricity has been completed, some key equipment is undergoing trial production, and the company is also speeding up the official commissioning of the project.

Investment suggestions: The company is deeply involved in civil superalloy products. Capital expenditure on oil and gas in major downstream application areas has increased, and orders for the company's products are strong. In addition, the company's products are gradually opening up space to expand product demand in the fields of new energy, nuclear power, offshore engineering, etc. With the production capacity of the Dongtai project, the company's product delivery capacity will be greatly improved, and the company's performance can be expected to be released. We expect the company to achieve net profit of 0.098/0.124/0.148 billion yuan in 2024-2026, respectively, and the PE corresponding to the closing price on October 24, 2024 will be 31/25/21 times, respectively, maintaining the “recommended” rating.

Risk warning: the risk of the project falling short of expectations, the risk of fluctuations in raw material prices, the risk of market competition, etc.