Sirui New Materials released its three-quarter report: Q3 achieved revenue of 0.34 billion yuan (yoy +10.08%, qoq +1.04%) and net profit of 22.3325 million yuan (yoy +41.23%, qoq -28.82%). Q1-Q3 2024 achieved revenue of 0.964 billion yuan (yoy +10.98%), net profit of 78.2682 million yuan (yoy +14.36%), deducting non-net profit of 72.0055 million yuan (yoy +30.35%). The company continued to expand the application areas of copper alloy products, and revenue grew steadily. The growth rate of net profit due to non-recurring profit and loss items was suppressed by non-recurring profit and loss items. After deducting non-net profit, it achieved a high increase and maintained the “increase in holdings” rating.

The direction of emerging industries is growing rapidly, and the product structure optimization effect is remarkable. According to the company's announcement, in the 24Q3 single quarter, the company achieved a year-on-year high increase in net profit. The main reason was that the company actively exploited the international market, export revenue increased markedly, and the sales structure was continuously optimized. At the same time, commercial aerospace and other companies grew rapidly and gradually began to contribute benefits. 2024Q1-Q3's gross margin was 23.00%, +2.77pcts year over year. Among the non-recurring profit and loss projects included by the 2024Q1-Q3 company, the government subsidy was 8.6002 million yuan, and 2023Q1-Q3 was 20.5027 million yuan, thus suppressing the company's net profit growth rate. The net profit growth rate of the company's deducted non-net profit increased by 30.35% year-on-year, higher than the revenue growth rate, and the effects of optimizing the company's product structure and improving quality and efficiency were remarkable. 2024Q1-Q3

The release of a fixed increase plan to broaden the application field of high-performance materials is expected to open up long-term growth space. The company plans to raise 0.6 billion yuan of capital, of which 0.2 billion yuan will be invested in the industrialization project of liquid rocket engine thrust chamber materials, parts, and components, 0.34 billion yuan will be invested in the Sirui New Material Technology Industrial Park project, and 0.06 billion yuan will be used to supplement working capital. According to the company's announcement, after the liquid rocket engine project is completed and delivered, the company carefully anticipates that the price of the product concerned will decline with product maturity. The revenue of the project is expected to be 0.179-0.201 billion yuan; the science and technology industrial park project is expected to achieve sales revenue of 0.507 billion yuan in the year it is put into production.

The military and civilian fields go hand in hand, and are optimistic about investment opportunities in the additive manufacturing sector 1) In the military sector, additive manufacturing not only conforms to the “one main” logic, can be applied to explosive main combat equipment such as military aircraft, missiles, and engines, but also conforms to the “penetration rate increase” logic, that is, it is in the stage of rapid rise from low penetration rate to high penetration rate in various types of main combat equipment; 2) In the field of civilian products, additive manufacturing technology is expected to build large-scale mass production and higher yield supply chain systems in emerging fields such as consumer electronics and commercial aerospace. It is recommended to continue to pay attention to investment opportunities in the “additive manufacturing” sector in Huatai Military's main “one main, two rate” investment line.

Lower profit forecasts and maintain the “increase in holdings” rating

Considering that the company's liquid rockets and other emerging fields still require a certain period of time to shift from R&D to revenue generation, we lowered the company's revenue forecast for high-performance copper alloy materials. The company's net profit for 24-26 is 0.107/0.153/0.209 billion yuan (previous value was 0.138/0.196/0.268 billion yuan). Using the segmented valuation method, the target market value is 7.07 billion yuan, and the target price is 9.72 yuan (the previous target price was 8.91 yuan), “increasing holdings”.

Risk warning: the risk of technological upgrading and iteration; the risk of technology failure to form a product or achieve industrialization.