Company profile

The company is a leading enterprise in the domestic powder metallurgy industry. It is mainly engaged in the three major businesses of powder compression molding (P&S), soft magnetic composites (SMC), and metal injection molding (MIM). The PS business is the leading domestic market, and the SMC business capacity is the first tier in the world. MIM is used in consumer electronics fields such as folding screen phones, and is deeply tied to major domestic customers. The upstream and downstream layout of the company's industrial chain, and the three major businesses are diversified and collaboratively developed. 24Q1 achieved revenue of 1.102 billion yuan, up 37.42% and 2.10%; net profit to mother was 0.081 billion yuan, up 320.81%, down 10.78%; after deducting non-net profit of 0.075 billion yuan, a year-on-year decline of 11.38%.

Investment logic:

MIM: According to IDC forecasts, global smartphone shipments will reach 1.2 billion units in 24, an increase of 2.8%, and folding screen shipments will reach 25 million units, an increase of 37%. MIM is the core manufacturing process for hinges, the core component of folding screens. The company's subsidiary Fuchi Hi-Tech has both technical and customer advantages, binds major domestic customers, accounts for a large share of components and actively promotes the assembly business; the innovative form of folding up and down, left and right is shifting to more than three percent off, driving the company's product ASP upgrade. Shanghai Fuchi has completed a capital increase in Yuanzhi Spark's shareholding. The final actual controller is the Shenzhen State-owned Assets Administration Commission. The business is expected to achieve revenue of 1.645 billion yuan in 24, an increase of 60.87% over the same period.

SMC: Actively expanding production capacity, further demonstrating scale and technical advantages. The company is a global leader in metal magnetic powder cores. Product iteration+raw material supply continues to improve, and profitability continues to improve. The company's downstream applications are used in fields such as photovoltaics, new energy vehicles and air conditioning. Self-supply of powder raw materials and product differentiation and iteration build core barriers, seize the development opportunities of downstream inductor demand, and actively expand production capacity. The business is expected to achieve revenue of 0.965 billion yuan in 2012, an increase of 16.8% over the same period.

PS: The leading position is stable, and export substitution drives steady growth. According to statistics from the China Machinery Association Powder Metallurgy Association from January to September 23, the company's sales revenue accounts for 40.18% of the total number of manufacturers within the statistical range, accounting for 36.95% of sales. It has been in an absolute leading position in the domestic powder metallurgy industry for many years, which helps the company promote import substitution and global business expansion. The business is expected to achieve revenue of 2.207 billion yuan in 2012, an increase of 11.7% over the same period.

Profit forecasts, valuations, and ratings

It is predicted that in 2024-2026, the company will achieve net profit of 0.454, 0.599, and 0.762 billion yuan, respectively, an increase of 129.48%, 31.99%, and 27.07% over the previous year, giving the company 28 times the PE valuation in 2024, with a target market value of 12.717 billion yuan. The corresponding target price is 20.63 yuan/share, giving a purchase rating for the first coverage.

Risk warning

Market competition increases risk, downstream market demand falls short of expectations, risk of raw material price fluctuations, and risk of excessive majority shareholders' pledge ratio.