Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 2,681 billion yuan, a year-on-year decrease of 3.58%, a year-on-year net profit of 55 million yuan, a year-on-year decrease of 0.59%, and net profit after deducting non-return to mother of 0.24 million yuan, a year-on-year decrease of 38.85%. Looking at a single quarter, the company achieved operating income of 674 million yuan, a decrease of 8.68% from the previous year, an increase of 4.29%; realized net profit due to mother of 0.17 million yuan, an increase of 100.68% from the previous year, a decrease of 0.76% year on year; and realized net profit without return to mother of 940,000 yuan, a decrease of 80.83% from the previous year, and a year-on-year decrease of 88.36%. 2023Q4 With 2024Q1, the company achieved operating income of 661 million yuan, -1.95% month-on-month, +8.76% year-on-year; realized net profit of 0.1 billion yuan, -42.32% month-on-month and -8.44% year-on-year; realized net profit without return to mother of 0.06 million yuan, +560.74% month-on-month, and -37.29% year-on-year.

Volume & Price: 3D printing powder continues to be sold in volume. In 2023, the company sold about 23,118.26 tons of copper powder, +0.93% year on year, about 2955.11 tons of tin powder, -5.86% year on year, about 89.78 tons of 3D printing powder, +22.38% year on year, and sales volume of electronic paste was about 334.98 tons, or +133.11%. Sales of copper powder remained stable, and sales of tin powder declined slightly due to weak demand for electronics. The year-on-year increase in sales of electronic paste was mainly due to the expansion of the production capacity of the establishment of Yana Micro. The year-on-year increase in sales of 3D printing powder materials was mainly due to the increase in sales of developing new customers. In 2023, the company's gross margin was 8.31%, up 0.96pct year on year; 2023Q4, the company's gross margin was 8.37%, down 0.05pct from month to month, up 1.55pct year on year; 2024Q1, the company's gross margin was 8.58%, -0.18pct year on year, +0.21pct month on month.

Asset disposal revenue: 2023Q4. Youyan Additive publicly listed the transfer of vacuum induction melting inert gas atomization milling equipment and nickel-based superalloy powder production technology for powder turbine discs to Steel Research Gaona. The total assessed value of this asset transfer was 16.81 million yuan (excluding tax), and the final transaction price was 18.2 million yuan (tax included). The transaction confirmed asset disposal income, and the total profit profit was 10.4921 million yuan.

Core highlights: 1) Copper-based powder sector: The Chongqing base was put into operation in the second half of '23. The Thai project began trial production in March '24, and production is expected to be achieved by the end of June. After that, the overall copper-based powder production capacity will reach 40,000 tons, and the company is expected to further increase its share by expanding overseas markets; the company is also actively diversifying product categories, laying out products such as electrolytic copper powder, atomized copper/alloy powder, and electronic grade copper oxide powder, contributing to long-term growth momentum. 2) Tin-based powder sector: After the fund-raising project is put into operation, the total production capacity of the company's tin-based powder materials will reach 5,000 tons; the company continues to upgrade the product structure, and the share of finer high-value-added tin powder products is expected to continue to increase; 3) 3D printing powder materials sector: 500 tons of additive production capacity have already been implemented, and the company introduced strategic investor Steel Research Investment Co., Ltd. to deepen the cooperative relationship between the company and downstream. Benefiting from the rapid development of the 3D printing industry, it is expected that the 3D printing industry will gradually expand and open up new growth space. 4) Electronic paste sector: The company extends downstream to tin powder and expands electronic paste links including solder paste, silver paste, etc., and established a subsidiary YannaMicro to be responsible for the electronic paste business to further enhance added value, and future profitability is expected to continue to increase.

Investment proposal: The company is a leading domestic copper-based and tin-based powder material. After the fund-raising project is completed, production capacity will be further expanded. The implementation of 3D printing powder material production capacity is expected to contribute to the increase in performance as market demand gradually increases. We expect that in 2024-2026, the company's net profit will be 0.72, 1.00, and 127 million yuan, and PE corresponding to the April 30 stock price will be 43/30/24X, respectively, maintaining the “recommended” rating.

Risk warning: downstream demand falls short of expectations; risk of raw material price fluctuations; project progress falls short of expectations.