every AI newsletter, on January 12, 2024, huatai securities issued a research report to review sri new materials (688102).

copper-based material platform faucet, first coverage to give "overweight" rating

Srui New Material is the leading high-performance copper-based new material platform leader, the company is committed to the research and development and manufacturing of copper-chromium-based alloys, and the technology to expand to its related industries, with capacity elasticity and demand generality and technical toughness. We expect the company to achieve a net profit of 1.02/1.52/0.222 billion yuan in 23-25, corresponding to PE 66/44/30X. In the emerging field, the company's growth logic combines the downstream high growth rate (rocket thrust indoor wall materials, optical module base materials, etc.), domestic substitution (medical imaging components) and permeability increase (copper and iron alloys), the scarcity is highlighted. We use the divisional valuation method, giving the target market value of 7.704 billion yuan, corresponding to the target price of 13.76 yuan, the first coverage to give an "overweight" rating.

Focus on high-end copper alloy materials and continue to expand product Pipeline

The company is a leading high-performance copper-based new material platform company, the main business includes high-strength and high-conductivity copper alloy, medium and high-voltage electrical contact materials, high-performance metal chromium powder and medical imaging components. The company's downstream can be divided into traditional tracks (strong stability) and emerging tracks (high growth),2019-2022 the company's revenue CAGR 19.24 percent, the parent net profit CAGR 45.88 percent. The company's revenue is mainly composed of high-strength and high-conductivity copper alloy and medium-high-voltage electrical contact materials, accounting for more than 80% in recent years. At the same time, the company is actively laying out high-end applications. The revenue of metal chromium powder and medical imaging components continues to grow, with the total revenue accounting for 8.82 in 2022 from 4.27 in 2018.

Downstream applications span multiple plates, with traditional tracks as shields and emerging tracks as spears

in terms of traditional racetrack, 1) copper-chromium contacts: the core components of power switches. it is estimated that the market size of copper-chromium contacts in China will be 4.626 billion yuan in 21-30 years and the CAGR will be 11.43 in 22-30 years. 2) End rings and guide bars: The rail transit industry is developing steadily, with an estimated market size of 57.113 billion yuan in 21-30 and a CAGR of 10.00 in 22-30 years. In terms of emerging racetracks, 1) medical components: the increase in localization rate contains development opportunities. It is estimated that China's market size will be 6.971 billion yuan in 21-30 years and CAGR will be 18.16 in 22-30 years. 2) High-performance chromium powder: benefiting from the expansion of the aviation industry, China's market size is expected to be 17.322 billion yuan in 21-30 years and CAGR is expected to be 20.71 in 22-30 years. 3) Rocket Nozzle, the 22-30 year CAGR is 21.79 percent.

Capacity expansion + technical advantages, long-term sustainable growth of the company's performance

in terms of capacity flexibility, the company has a wide range of business applications and a wide variety of products. while steadily advancing the original industry, it has continuously increased its industrialization capability of new technologies. multiple "n-year doubling" plans and multiple "from 0 to 1" new product pedigree have created sufficient capacity flexibility for the company. In terms of technical toughness, as of 2023.6.30, the company has a total of 20 projects under research, involving high-strength high-conductivity high-temperature copper alloy, 3D printing, semiconductor equipment cooling plate and other new products, some products have been developed and gradually carried out customer sample delivery or small batch production, downstream covering aerospace, optical communications and other applications.

Risk Warning: Technology upgrade iteration risk, technology failure to form products or achieve industrialization risk, cost increase risk.

(Source: Huibo Investment Research)

Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Please verify before use. Operate accordingly at your own risk.

(edited by Zeng Jianhui)