Ningbo Boway Alloy Material Co.Ltd(601137) (601137)
High end alloys comply with the policy trend and benefit from the wave of localization. In recent years, China’s net import of copper alloy has shown a downward trend year by year, and the overall self supply capacity of the industry has been enhanced, but some high-end copper alloy materials still rely on import. In made in China 2025, the State Council clearly pointed out that China should realize the independent guarantee of 70% of core basic parts and key basic materials by 2025, and domestic substitution is imperative. As a leading enterprise of special alloy and new materials in China, the company has been deeply engaged in the field of high-end copper alloy for many years, with complete independent intellectual property system and complete product types and brands, covering 5g communication, new energy automotive electronics, semiconductor chip, intelligent terminal and equipment and other industries. With profound technical accumulation, the company has successively launched high-end alloy plate and wire rod products, such as VC temperature equalizing plate, semiconductor lead frame and other core products, which have been recognized by downstream high-end customers, took the lead in breaking the technical barriers of high-end alloy and realizing the domestic substitution of some high-end products. It is expected that with the joint help of policy driven and industrial upgrading, the company will benefit from the domestic substitution trend of high-end alloys.
The prosperity of downstream high-end applications continues, and there is strong demand in the field of new energy and communication. Driven by the global demand for low-carbon environmental protection, the penetration rate of new energy vehicles continues to increase. According to IDTechEx prediction, the penetration rate of global new energy vehicles will reach 19% in 2030 and 72% in 2040. The vigorous development of the new energy vehicle industry has brought huge demand for copper and its alloys. According to the statistics of the International Copper Association (ICA), compared with the copper consumption of 20kg per traditional diesel locomotive, the average copper consumption of pure electric vehicles reaches 83kg, which is distributed on the lithium battery electrode, motor coil, high-speed and high-voltage connectors and other parts of the vehicle body. In addition to new energy vehicles, copper alloy has also become the main heat dissipation material for 5g base stations, mobile phones, computers and other consumer electronics with excellent thermal conductivity. In addition, the lead frame as the main structural material of integrated circuit packaging is also mostly made of copper alloy. The company’s new material products cover 17 alloy series and more than 100 brands. It is a manufacturing enterprise with the most complete high-end special alloy brands and production lines in China. Its products are widely used in the production process of parts in the above fields as raw materials. With the rapid popularization of new energy vehicles and 5g networks and the vigorous development of consumer electronics and semiconductor industries, the company will fully benefit from its rich product line layout.
Arrange production expansion and technological transformation projects in advance to improve production capacity and open up long-term growth space. In order to cope with the growing market demand, the company arranged the production expansion and technical transformation of its main business in advance, and the production capacity is expected to be significantly improved in the future. In terms of new materials: the company started the 50000 ton special alloy strip project in 2018. Recently, affected by the epidemic, the overall project progress has been delayed. According to the semi annual report, it has entered the trial production stage; The construction of 6700 ton aluminum welding wire project will be started in 2019. The construction of phase I project has been completed in the middle of the year and has entered the stage of trial production and trial marketing; In 2020, the construction of 31800 tons of special alloy rod and wire manufacturing production line and 20000 tons of special alloy strip finished product manufacturing production line in beikenhoff Vietnam plant will be started. In the middle of the year, some of the main equipment of the project has entered the installation stage. The bar project is in the stage of equipment foundation construction and equipment arrival. The plate and strip project will be implemented when the 50000 tons project is put into operation. In terms of new energy (photovoltaic): a large-scale upgrading project will be implemented for the battery workshop from 2020, and the battery specification will be upgraded from 166 to compatible 182 / 210. With the completion and operation of the above related expansion projects, we expect that the company’s total new material capacity is expected to increase from 150000 tons by the end of 2020 to 270000 tons in the next three years. According to the semi annual report, the new energy capacity will be increased from 700MW to 1GW with the implementation of the transformation project, which will fully meet the further growth of future market demand, Lay a foundation for the company’s long-term performance growth.
Investment suggestion: with technological breakthroughs in high-end application fields and complete product system, the company will fully benefit from the high landscape and localization substitution demand of relevant downstream in the future. The gradual implementation of production expansion and technical transformation projects will also ensure that the company’s production capacity will fully meet the future market demand. We expect the net profit of the company from 2021 to 2023 to be 352 million yuan, 618 million yuan and 795 million yuan respectively, which is covered for the first time and rated as “overweight-a”.
Risk warning: the price of upstream raw materials continues to rise; The production expansion progress of new materials is less than expected; Downstream demand growth was lower than expected
