Summary:

Maintain the "overweight" rating. The overall strength of the company continues to increase, raising the company's EPS forecast for 2021-2022 to 0.25max 0.33 yuan (formerly 0.25max 0.30 yuan), and the new 2023 EPS forecast to 0.39 yuan.

Considering that the company's performance will accelerate after the company's new project is put into production, the company will be valued at 25 times PE in 2021, raising the company's target price to HK $7.58 (formerly HK $3.44).

Rating.

The output of tool and die steel ranks first in the world, and its production capacity continues to expand. The strength of the company's tool and die steel continues to rise, and the output of products has been climbing since 2016, ranking fourth in the world. According to SMR steel data, the company's tool and die steel output has leapt to the top of the world in 2020. In the first half of 21, the company's tool and die steel product sales were 83700 tons, a slight drop of 2.8% compared with the same period last year. The production capacity of the company's high-speed steel products ranks first in the world for 16 consecutive years. In the first half of 21, the sales volume of high-speed steel products was 11300 tons, up 13.4% from the same period According to the company announcement, the company's 50,000-ton die steel expansion project and 7000-ton fast forging machine project are being carried out in an orderly manner. After the project is put into production, the company's strength will be further enhanced.

Powder metallurgy continues to make breakthroughs. Since the first 2000-ton powder metallurgy project was completed and put into production in 2019, after early technical exploration and production capacity climbing, as of the middle of 21 years, the company's powder metallurgy capacity utilization rate has gradually reached production. The company's powder metallurgy second phase of 3000 tons is being carried out in an orderly manner. We believe that the company's powder metallurgy technology is advanced and the barriers are deep. In the future, the powder metallurgy market will continue to open up, promote the company's product structure, and the company's profitability will continue to enhance.

Overseas cutting tools continue to increase production capacity, titanium alloy products to expand downstream. The second phase of the company's Thailand plant project has landed steadily, and the production capacity of cutting tools will rise to 100 million units. At the same time, the company's titanium alloy products extend downstream, making a breakthrough in the field of glasses and 3D printing, and the profitability of the titanium alloy plate will gradually increase in the future.

Risk hint: the production progress of new capacity is not as expected.