Investment advice
The company focuses on the preparation technology of copper-based special materials and continues to expand emerging downstream fields. The company's medium- and high-voltage electrical contact materials and products, and high-strength high-conductivity copper alloy materials and products solve the problem of import substitution and are resold overseas. Some products have achieved leading global market share, and are expected to continue to grow in the future. Newly expanded liquid rocket engine thrust interior walls, CT&DR ball tube components, high-performance chrome powder, and optical module chip base materials are entering a boom window, and performance is expected to grow rapidly. The company is technologically advanced, supplies leading downstream customers, while comprehensively expanding production capacity and has strong growth potential. Referring to the 2023 company performance report, we appropriately raised the company's profit forecast. According to our forecast, the company's net profit to mother for 2023/2024/2025 was 1.01/1.45/181 million yuan, respectively, corresponding to PE 60.98, 42.67, and 34.24 times, maintaining the “buy” rating.
Liquid rocket engine thrust interior wall: Benefiting from the new commercial space journey, the commercial space era, global rocket launches have accelerated markedly. Liquid rocket engines have the advantage of being reusable. According to our forecast, in 2026, China and the global demand for rocket engine combustion interior walls will be 1904 and 4937 sets, respectively, and the compound growth rates will be 25.5% and 28.8% respectively in 2022 to 2026. Relying on core technology, the company's self-developed liquid rocket engine thrust interior walls have been successfully used in Blue Rocket Aerospace's Suzake-2 Yao2 carrier rockets, etc. The company has initiated an annual production plan of 1,100 units, and is expected to achieve a production capacity of 100 units by the end of 2023. Benefiting from the new commercial aerospace journey, the sector is expected to maintain rapid growth.
CT&DR ball tube components: domestic replacement space is broad
According to Device House data, in 2021, China had only 27 CT units per million people, and it relied on imports, so there is still plenty of room for development. As the most expensive consumable component in CT, CT tubes are currently mainly supplied by overseas suppliers, and there is plenty of room for domestic replacement. According to our forecast, by 2026, China's CT and DR ball tube components market size will be about 1.32 billion yuan and 190 million yuan respectively. The company independently developed manufacturing technology for CT and DR ball tube components, and successfully supplied downstream leading CT ball tube manufacturers. By 2023, the company has a production capacity of 10,000 sets of CT and DR ball tube components, and plans to add 30,000 sets of CT ball tube components, 15,000 sets of DR ray tube components, etc. Against the backdrop of increased localization of CT tubes, the sector's performance is expected to maintain high growth as production capacity is released.
High-performance chromium powder: Benefiting from the expansion of production capacity of downstream superalloy companies. According to our forecast, in 2026, the market size of high-performance chromium powder for superalloys in China will be about 1.63 billion yuan, and the CAGR will reach 18% in 2022 to 2026. In order to meet the demand for high-performance metal chromium powder from high-end superalloys, mainly two-engine special and ultra-supercritical thermal power generation units, the company completed an R&D and manufacturing base of 2,000 tons/year of high-performance metal chromium by the end of 2022. With the release of additional production capacity, the company's performance in the field of chromium powder is expected to grow rapidly.
Optical module base: High demand for high-speed optical modules
According to Lightcounting's forecast, the global optical module market size will grow by CAGR 11% from 2023-2027. At the same time, AIGC's demand for high computing power will also accelerate the iteration of optical modules to 800G and above products. The company extends the core preparation technology of tungsten-copper alloy materials to optical module chip base materials. It plans to complete the manufacturing capacity with an annual output of 2 million pieces by the end of 2023, and plans to expand production of 20 million sets/year of bases and 10 million sets/year of cases. With the release of production capacity, the sector is expected to maintain rapid growth. The company is also simultaneously developing a low-cost mass production process for diamond copper to reserve materials of 1.6T or more.
Risk warning: Downstream demand falls short of expectations, raw material price fluctuations and hedging management risks, technology upgrades and iterative risks, new production capacity releases falling short of expectations, and exchange rate fluctuations.