Investment Highlights:

The company released its 2024 annual report, and its annual performance increased highly: During the reporting period, the company achieved revenue of 960 million yuan (YoY+35%), net profit attributable to the parent company of 251 million yuan (YoY+44%), and net profit not attributable to the parent company of 227 million yuan (YoY+51%). In 2024, the company's gross sales margin will be 40.38%, a year-on-year increase of +1.12pct, a net profit margin of 26.18%, a year-on-year increase of +1.73pct, and a sales, management, and financial expense ratio of 6.66%, a year-on-year increase of -1.40pct. In 24Q4, the company achieved revenue of 267 million yuan (YoY+33%, QoQ+7%), net profit attributable to the parent company of 66 million yuan (YoY+35%, QoQ-1%), and net profit of not attributable to the parent company of 57 million yuan (YoY+35%, QoQ-10%), and the performance was in line with expectations. In 24Q4, the company's gross sales margin was 35.72%, with a year-on-year and month-on-month change of -1.83pct and -7.01pct, respectively, and a net profit margin of 24.94%, a year-on-year and month-on-month change of +0.46pct and -1.98pct respectively. The company announced the profit distribution plan for 2024: it is planned to distribute a cash dividend of 0.5 yuan (tax included) per share to all shareholders, with a total cash dividend of 92.87 million yuan (tax included), accounting for 36.95% of the net profit attributable to the parent company for the year; At the same time, it is planned to use the capital reserve to increase 3 shares for every 10 shares to all shareholders.

In 2024, downstream demand will continue to pick up, and the company's high-end products will be rapidly scaled up, and its performance will achieve rapid growth. Since 2024:

1) The demand of the electronics industry has gradually recovered, and the prosperity of downstream copper clad laminates, IC substrates, packaging and other fields has continued to recover, driving the demand for powder fillers; 2) The development of communication technology (5G, 5.5G) has driven the demand for a new generation of high-frequency and high-speed copper clad laminates (M7, M8, etc.), the demand for Low-Df, Low-Dk molten silicon powder and spherical silicon powder has increased rapidly, and the rapid development of the advanced packaging market (Chiplet, HBM, etc.) driven by AI has put forward requirements for filling materials such as low CUT point, high filling, and low radioactive content. The company is a leading enterprise in the localization of silicon powder in China, and its downstream covers the world's mainstream epoxy plastic molding materials and copper clad laminate manufacturers. According to the company's annual report data, in 2024, the company's angular inorganic powder will achieve sales volume of 76,700 tons (YoY+9%), revenue of 253 million yuan (YoY+9%), gross profit margin of 27.57%, year-on-year -5.18pct, and spherical inorganic powder sales volume of 36,700 tons (YoY+42%), revenue of 549 million yuan (YoY+49%), gross profit margin of 49.12%, year-on-year +2.9pct; The sales volume of other products was 7,900 tons (YoY+64%), the revenue was 157 million yuan (YoY+44%), and the gross profit margin was 30.40%, +0.92pct year-on-year. The

demand for heat dissipation upgrades has led to the continuous growth of the ductile aluminum market, focusing on advanced powder materials and rich reserves of new products. With the significant increase in battery energy density, the importance of thermal management system is highlighted, adhesives are widely used in PACK sealing, structural bonding, structural thermal conductivity, battery potting, etc., which can effectively improve the performance of power batteries. At the same time, in line with the development trend of increasingly complex and miniaturized functions of electronic equipment, the development of thermal interface materials that take into account the heat dissipation and insulation needs of core components of products has been driven, and the demand for alumina powder as a thermally conductive filler has grown rapidly, and more requirements have been put forward for its purity, particle size multiple modification and radioactivity. As a major manufacturing country in the world, China is the main consumer of spherical alumina thermal conductive powder, and the company has entered the field of alumina powder with silicon-based powder, and gradually realized the localization of the local market. In addition, during the reporting period, the company continued to deepen the research, development, application and promotion of functional powder materials such as nano-scale spherical silica, high-performance spherical titanium dioxide, and advanced nitride powder, and broke through many technical problems such as nitride spheroidization technology and aluminum nitride waterproofing, laying a solid foundation for the company's long-term growth.

Investment analysis opinion: maintain the net profit attributable to the parent company from 2025 to 2026 to 331 million and 409 million yuan respectively, and the new net profit attributable to the parent company in 2027 is forecast to be 498 million yuan, and the corresponding PE of the current market value is 32, 26 and 21X respectively, maintaining the "overweight" rating.

Risk Warning: 1) Downstream demand, project construction and new capacity ramp-up are less than expected; 2) domestic competition intensified, and the prices of major products such as silica powder declined; 3) Raw material and energy costs fluctuate significantly; 4) New product research and development is less than expected.