Guosheng Securities: Yi'an science and technology R & D and upgrading of magnesium aluminum alloy, liquid metal, medical magnesium materials

Magnesium aluminum alloy, liquid metal, medical magnesium industry leader in the field. The company has a complete magnesium-aluminum alloy industry chain, based on the main industry, card layout of liquid metal, medical magnesium field, to build a new growth point of the company. Its Yihao metal and magnesium an medical treatment are the "main battlefield" of the company's efforts in liquid metal and medical magnesium materials.

Liquid metal will bring the third material industry revolution, the company holds the formula, die-casting core patents. Liquid metal (also known as amorphous alloy) has excellent physical and chemical properties, such as high strength, high hardness, wear resistance and corrosion resistance. with the progress of die casting technology, liquid metal (also known as amorphous alloy) has the potential of mass production and one-time forming ability of complex structure. the advantage of cost efficiency is significant. The company holds the core patents of liquid metal formula and process equipment. LQMT (USA), a subsidiary of Hong Kong liquid Metals Co., Ltd., which is 100% controlled by the chairman, works in synergy with the company to consolidate its leading position in liquid metals. Zirconium-based liquid metal material has been officially selected as an important material of Mate Xs hinges for Huawei's second-generation folding screen phones. with the application and promotion of zirconium-based metals, the company has a broad market.

Biodegradable medical magnesium alloy benefits orthopedic patients, and the process of clinical and industrialization is advancing steadily. Magnesium is a major element in the human body, which can be degraded and absorbed after implantation into the human body, avoiding the pain and risk of secondary operation, and its mechanical properties are close to those of human bone tissue, and magnesium ions can promote bone formation and accelerate osteogenesis, and the cost is lower than that of traditional titanium alloy materials. therefore, it has obvious advantages in orthopaedic application. The company's high-purity magnesium bone nail domestic clinical trials have been steadily promoted, and have successfully obtained the EU CE certification and access to the EU market, which will open the blue ocean market of tens of billions of dollars in the near future.

New energy vehicles accelerate the lightweight process of cars, and join hands with Yunhai Metal to create the layout of aluminum-magnesium alloy "Yangtze River Delta + Pearl River Delta". Magnesium-aluminum alloy is a lightweight structural material for automobiles. at present, there are many problems in new energy vehicles, such as overweight, short mileage and so on. increasing the proportion of lightweight materials is an effective way to improve the mileage of new energy vehicles. the development of new energy vehicle industry, environmental protection and other national policies will accelerate the process of automobile lightweight. In 2020, the company completed the second phase of the Chaohu Yi'an Yunhai Light Alloy Precision Die casting production Base Project (the first phase was put into production in 2017), realizing the stable supply of raw materials and the location advantage of the double center layout of "Pearl River Delta + Yangtze River Delta". It has entered the supply chain of domestic and foreign well-known customers such as BYD and Tesla.

Investment suggestion: the company's liquid alloy holds the core formula and equipment patents, and zirconium-based liquid metal cutting into the core mobile phone manufacturer's supply chain is expected to open the business profit growth point for the company; on the other hand, the company has accumulated rich experience and R & D advantages in new energy vehicle lightweight materials, and the products have successfully entered the supply chain of well-known customers at home and abroad, and the follow-up is expected to enjoy market incremental benefits. The company has the advantages of medical magnesium alloy industrialization accumulation and first-in, and the industrial value of magnesium alloy is expected to be realized after medical clinical promotion. We estimate that the company's net profit from 2021 to 2023 will be 0.41,0.55 and 74 million yuan respectively, corresponding to 107.4, 80.0,59.1 times of PE. Considering that the company's current business is still in the early promotion stage and the subsequent performance growth is still uncertain, the company will be given a "hold" rating for the first time.

Risk tips: related new material orders are lower than expected; liquid metal industrialization is not as expected; magnesium and aluminum alloy main business performance is lower than expected; clinical application of medical magnesium alloy is slower than expected.