Carbonyl iron powder: the leading domestic carbonyl iron powder, benefiting from the two-wheel drive of automotive electronics and graphics card inductance. The downstream applications of carbonyl iron powder have blossomed at many points, including inductive components, precision parts, power tools, diamond tools, absorbing materials, magnetic fluids, etc. Carbonyl iron soft magnetic is its deep-processed product, as an excellent material for integrated inductors, suitable for scenarios with high performance requirements, high safety factor requirements, and relatively insensitive prices, and automotive electronics + graphics card inductors continue to drive the release of demand. Carbonyl iron powder has barriers such as process flow + safety supervision + material formulation, and the global supply is in a trend of head concentration. In 2023, the company's related production capacity will be 5,500 tons, and the fund-raising project plans to add 6,000 tons, which is expected to be doubled.

New process of cost reduction of carbonyl iron powder: cost reduction iron powder aims at incremental substitution + incremental market, and the 100,000-ton project opens up long-term growth. In terms of projects, the new process project is expected to form a production capacity of 100,000 tons of powder and 250,000 tons of by-products after reaching production, which can achieve an annual sales revenue of 3.423 billion yuan and a net profit of about 593 million yuan. In terms of technology, the company independently developed a carbonyl iron preparation process using placer ilmenite as raw material, and achieved comprehensive cost reduction and efficiency increase through by-product titanium slag, low-pure iron source, low-cost gas, and low-cost labor. In terms of the market, carbonyl iron powder is expected to replace electrolytic iron powder and other materials due to its small particle size, good sintering activity and high part density, which is expected to correspond to 51,000 tons of substitution demand; The inductance performance of carbonyl iron soft magnetic preparation is excellent, and it is expected to achieve an incremental demand of 55,000 tons in medium, high and high power scenarios.

Atomized alloy powder: a general-purpose material for consumer electronics, and a folding screen hinge opens a new cycle of demand. As a general-purpose powder, atomized alloy powder has a variety of downstream applications, including powder metallurgy, 3D printing, 3C precision parts, inductors, etc. MIM feeds its deep-processed products, which are suitable for high-volume production of precision structural parts, and highly match the needs of 3C. According to our calculations, it is expected that the global folding screen MIM hinge market space is expected to reach 24/49/75/97/10.7 billion yuan from 2023 to 2027, with a 4-year CAGR of 45.31%. The company has successfully developed 1750MPa, 1900MPa and other levels of folding screen mobile phone special high-strength steel powder and MIM feeding, which have been applied in many mobile phone brands.

Earnings Forecast and Valuation: We forecast that the company's net profit attributable to the parent company in 2024-2026 will be 0.84/1.18/181 million yuan respectively, and the PE valuation as of September 13, 2024 will be 27/19/13X. We select Boke New Materials and Dongmu as comparable companies, and according to Wind's consensus forecast, the average PE of comparable companies from 2024 to 2026 is 25/19/15x, respectively. As a leading carbonyl iron powder in China, the company's fund-raising projects are expected to contribute to the growth rate of performance, the new process of cost reduction will open up the growth space, and the folding screen hinge will open a new round of demand cycle for alloy powder. First coverage, with a "buy" rating.

Risk Warning: Demand fluctuation risk; the risk that the construction of the project is less than expected; raw material fluctuation risk; the risk that the new business development is less than expected; The risk of bias in market space measurement.