Performance summary: In the first half of 2023, the company achieved operating income of 592 million yuan (+22.9%), net profit of 57.58 million yuan (YoY +12.2%), net profit after deducting non-return net profit of 35.27 million yuan (-2.2% YoY), corresponding to basic EPS of 0.23 yuan. Among them, the company achieved revenue of 349 million yuan (+21.7% year on year, +44.1% month on month), net profit of 31.77 million yuan (YoY -10.1%, +23.10% month on month), basic EPS for a single quarter was 0.13 yuan; superalloy certification progress was fruitful, and revenue growth was rapid: The company's 2023H1 revenue increased 22.9% year on year, mainly due to continued rapid growth in sales of high temperature alloy products. Among them, high temperature corrosion-resistant alloy revenue increased 40.1% year on year. The company continues to strengthen new product development and market development, and many superalloy grades have made excellent progress in various fields such as “two aircraft” and oil and gas: ① Military aviation: 4 cast superalloy grades and 3 deformed superalloy grades have passed the installation assessment certification for a batch of main engine models; 4 brands and products with multiple specifications have entered the mainstream of a new generation of aviation. ② Domestic civil aviation: The products are supplied in batches to companies such as China Aviation Development and Development, and are also used in the development of civil aero engines; they have basically completed the certification of domestic bars for commercial aviation engines; they have basically completed the certification of domestic bars for commercial aviation engines and CJ-1000 series engine plates and rotating parts, and passed the trial production and verification of product forgings. ③ Overseas civil aviation: The parent alloy MarM509 has passed the technical review by Safran and has passed the casting certification of Safran Guiyang; IN718 and C263 forgings have been supplied indirectly to Rollo in bulk through customers; GE, Honeywell and other giants have all begun supplier entry procedures for the company. ④ Gas turbines: Several grades of cast superalloys have been indirectly supplied to Dongfang Electric's F-class 50MW heavy-duty gas turbines through customers; a certain grade of deformed superalloy is expected to complete certification of Baker Hughes gas turbines by 2023H2 and enter a qualified supplier of materials. ⑤ Oil and gas sector: Supplying IN718 materials in batches to Cameron opens up room for product growth in the domestic oil and gas sector. The certification progress of the company's products in the above fields provides sufficient guarantee for future product growth; profitability is still affected by the development period, and the future is expected to be steady and progressive: In terms of profitability, 2023H1's gross margin reached 15.6% (year-on-year -5.65pcts). The year-on-year decline was mainly due to price fluctuations and product structure changes of high-temperature alloy products during the pioneering period. The net interest rate reached 9.73% (year-on-year -0.92 pcts). The year-on-year decline was small mainly due to increased deposit interest income and reduced interest expenses; the company's financial expenses fell 254% year-on-year; Sexual profit and loss reached 22.31 million yuan, mainly due to 2023H1 receiving government subsidies of about 19.17 million yuan. Looking at a single quarter, the gross sales margin for 2023Q2 was 16.0% (+0.98 pcts), mainly due to the decline in the average price of electrolytic nickel raw materials in the second quarter and the net interest rate of 9.10% (-1.54 pcts.). The deviation from gross margin was mainly due to a large decline in net investment income and a large increase in asset and credit impairment losses; equity incentives stabilizing the military spirit: The company announced the draft equity incentive plan in August 2023, and plans to award a total of 53 incentives for the first time, accounting for 8.5% of the company's total number of employees, mainly covering company directors, Executives, core technical personnel and technical cadres, etc. The number of restricted shares to be granted under this incentive plan is 5.5 million shares, accounting for about 2.23% of the company's total share capital, and the grant price is 12.08 yuan/share. This incentive plan helps to motivate the core team and achieve a deep binding between employees' interests and shareholders' interests; the fundraising project boosts a breakthrough in production capacity: As of 2023H1, the company has a total production capacity of 8,000 tons of high-temperature corrosion-resistant alloys, including 3,000 tons of cast superalloys and nickel-based corrosion-resistant alloys, and 5,000 tons of deformed superalloys. The company's IPO fund-raising project “Technical transformation project with an annual output of 10,000 tons of aerospace-grade superalloys” plans to use 855 million yuan to raise capital. It plans to build an annual production capacity of 6,000 tons of deformed superalloys, 2,000 tons of deformed superalloy bars, and 2,000 tons of cast superalloy master alloys. The cumulative investment progress of the 2023H1 project is 28.88%; if this fund-raising project progresses smoothly, the company will reach a usable state in December 2025. A total production capacity of 18,000 tons of superalloys will be formed, and market competitiveness will be further enhanced; Investment proposal: Current company Superalloy grade certification is progressing smoothly, and the promotion of fund-raising projects will effectively expand superalloy production capacity. As a rising star in the industry, the company's competitiveness can be expected to improve. In the future, the successive testing and gradual commissioning of superalloy products, as well as the increase in profitability brought about by product unit price increases and structural optimization after the transition from a pioneering period to a mature period, will be the core driving force for the release of the company's performance. We expect the company to achieve operating income of 13.8/16.8/2.14 billion yuan in 2023-2025, a year-on-year increase of 45.5%/21.3%/27.5%, and realized net profit of 120/ 187/264 million yuan, respectively, an increase of 27.1%/55.6%/41.3% over the previous year, corresponding to PE 49X/32X/ 22x. Maintain a “buy” rating.

Risk warning: Risk of rising raw material prices, product grade verification progress falling short of expectations, fund-raising projects and production progress falling short of expectations, etc.