Cast superalloys “little giants”, and deformed superalloys expand rapidly. Established in 2004, Longda Co., Ltd. expanded from alloy pipe business to high temperature corrosion-resistant alloy business. As of mid-23, it had a production capacity of 3,000 tons of cast superalloys and 5,000 tons of deformed superalloys. The high temperature alloy business has become the focus of the company's development. The high temperature alloy business has become the focus of the company's development. The high temperature alloy revenue and gross profit in '22 accounted for 50% and 64%, respectively, and production reached 2,472 tons. In '22, the company won the title of a national-level specialized and innovative “little giant” enterprise for casting superalloy products.

The international commercial engine boom is rising, and superalloys are entering overseas supply chains to welcome opportunities. Since 2023, the global aviation market has been recovering at an accelerated pace. Airbus and Boeing have gradually increased production, and 23H1 net orders have increased by more than 100%. High-temperature alloys are mainly used in aero engine hot-end parts. Driven by new civil aviation orders and after-sales market demand, the unfinished orders of Haynes, the leading US high-temperature alloy company, have also exceeded pre-pandemic levels in 2023. Due to the penetrating management of raw material suppliers from overseas aero engines, it has been difficult for China's superalloys to play a role in the international civil aviation supply chain. However, during the pandemic, China's extremely competitive insurance and supply capabilities have opened up opportunities for import substitution.

The production capacity of superalloys is expected to increase to 18,000 tons, with regional and customer advantages helping to enter the “core circle” of aviation development. The company's IPO fundraising project is 10,000 tons of superalloys, and the production capacity is expected to reach 18,000 tons after completion. The aviation industry chain is developing in a clustered development trend. The strategic cooperation between the Jiangsu Provincial Government and COMAC is focusing on building an aerospace industry cluster with international competitiveness. It has not only formed a supporting cluster for the “two aircraft” industry chain in the region, but has also attracted leading international and domestic aviation companies. It is expected that local enterprises will accelerate their entry into the supply chains of international giants. Longda Co., Ltd. itself has also continued to make breakthroughs in the field of civil aviation customers and has become a material supplier for Safran, Rollo, and Collins. GE and Honeywell are in the process of implementing supplier entry procedures.

It is estimated that the company's EPS in 23-25 is 0.46, 0.82, and 1.13 yuan/share respectively, which is comparable to the company's 30XPE in '24. Considering the company's high performance growth rate, a 15% premium will be given, corresponding to 35XPE, with a target price of 28.70 yuan, covering the purchase rating for the first time.

Risk warning

The risk that the macroeconomic economy falls short of expectations, the risk of aviation recovery falling short of expectations, the risk of customer certification falling short of expectations, the risk of fund-raising projects falling short of expectations, the risk of fluctuations in raw material prices, and the risk of unsuccessful recovery of accounts receivable.