Event: according to the company's semi-annual report for 2023, the operating income of 2023H1 was 180 million yuan, down 22.56% from the same period last year; the net profit from return to home was 37.92 million yuan, down 32.36% from the same period last year; and the net profit from non-return was 33.56 million yuan, down 30.55% from the same period last year. Q2's operating income was 101 million yuan, down 21.67% from the same period last year, up 26.98% from the same period last year; the net profit returned to its mother was 21.54 million yuan, down 25.95% from the same period last year and 31.42% from the previous year; and the net profit from non-return was 19.15 million yuan, down 29.80% from the same period last year and an increase of 32.90% from the previous month.

Comments:

Q2 revenue and net profit increased month-on-month. The company's revenue fell 52.34 million yuan in the first half of 2023 compared with the same period last year, mainly due to the decline in unit price caused by the adjustment of the sales structure of alloy powder-- affected by the slowing demand for the upgrading of consumer electronic products such as wearable devices and mobile phones. The atomized alloy powder purchased by customers changed from high-end cobalt-chromium series powder to iron-based powder with lower unit price, and the unit price decreased by 85% compared with the same period last year, so although the sales volume of products increased by 47% compared with the same period last year. The sales revenue of this part is still down 78%, or 72.86 million yuan. However, the company's Q2 revenue and net profit both recorded month-on-month growth, which we believe is mainly due to the increase in production and sales brought about by the trial production of Q2 with 2000 tons of carbonyl iron powder.

"process optimization + product structure adjustment + opening up new customers and new markets" three carriages drive the future development of the company. Aiming at the shortage of ultra-micro inductor powder downstream, the company carries out process optimization work, which improves the output rate of ultra-fine powder and the overall gross profit margin of the company. In terms of product structure, the company grasps the strong demand for ultra-fine particle powder and high temperature resistant powder from downstream inductor components in automotive and server fields, as well as the urgent demand for high strength steel and light steel powder products for precision parts such as folding screen hinges, which reduces the adverse impact of the decline of ordinary products. In addition, the company focuses on the development of consumer electronic structures, soft magnetic functional materials, 3D printing, soft magnetic motors and other fields, and has entered the list of some mainstream suppliers. In addition, the company has increased its production capacity, and we expect that the production of Ningxia's "100000 tons of metal soft magnetic micro-nano powder project" in the future may bring excess income for the company.

With the continuous enrichment of downstream application scenarios and the increasing demand for high-frequency and high-power scenarios, ultra-fine powder is expected to enter a period of rapid development. Compared with the assembled inductor, the integrated inductor made of ultra-fine soft magnetic powder has the advantages of miniaturization, lightweight and low power consumption. it has been widely used in notebook computers, servers, automotive electronics and other electronic circuits. and in a period of sustained high growth. In addition, the development of new energy industry has put forward new technical requirements for high-power energy conversion devices. Metal soft magnetic materials prepared by carbonyl iron powder are ideal materials that can meet the requirements of the downstream market through the improvement of production process. With the popularity of new energy vehicles and the laying of large-scale charging piles, fast and high-power charging will become a new trend of consumer demand, or will drive the demand for carbonyl iron powder. In addition, with the improvement of powder metallurgy technology, the mechanical properties of powder metallurgy parts have surpassed the castings and gradually approached the forgings, which is expected to provide more abundant process routes for the manufacture of traditional parts, expand the application range of powder metallurgy parts, and bring new development opportunities.

Profit forecast and investment rating: taking into account the pace of production capacity of the company's carbonyl iron powder and atomized alloy powder investment projects, we estimate that the company's 2023-2025 return net profit is 1.01,1.42,208 million yuan respectively, EPS is 1.18,1.66,2.43 yuan per share, the current stock price is 36x, 26x, 18x respectively, maintaining the company's "buy" rating.

Risk factors: the company's atomized alloy powder project and carbonyl iron powder project construction is not as expected; the company's Ningxia project construction and downstream customer expansion is not as expected; downstream electronic components and precision parts industry demand is lower than expected; raw material prices have risen sharply.