Core Viewpoint - The company reported its 1H25 financial results, showing revenue of 1.78 billion yuan, a year-over-year increase of 8.1%, and a net profit of 180 million yuan, up 6.2% year-over-year, aligning with market expectations [1] Financial Performance - In 2Q25, the company achieved revenue of 1.01 billion yuan, a year-over-year growth of 12.4% and a quarter-over-quarter increase of 30.4% [1] - The net profit for 2Q25 was 100 million yuan, reflecting a year-over-year increase of 6.7% and a quarter-over-quarter growth of 28.9% [1] - The gross margin for 1H25 decreased by 3.9 percentage points to 17.6%, while the net margin fell by 0.2 percentage points to 9.9% [1] - The gross margin for 2Q25 was 17.0%, down 4.9 percentage points year-over-year, and the net margin was 9.8%, down 0.5 percentage points year-over-year [1] Segment Performance - Revenue from power forging increased significantly, reaching 690 million yuan, a year-over-year growth of 44.9%, accounting for 39% of total revenue [2] - Aerospace forging revenue was 440 million yuan, down 3.5% year-over-year, representing 25% of total revenue [2] - Petrochemical forging revenue decreased by 14.3% year-over-year to 290 million yuan, making up 16% of total revenue [2] - Other forgings generated 170 million yuan in revenue, up 19.0% year-over-year, accounting for 9% of total revenue [2] - Domestic revenue was 1.44 billion yuan, a year-over-year increase of 5.4%, while export revenue reached 340 million yuan, up 21.4% year-over-year [2] Cost and Expenses - The company's expense ratio decreased by 2.8 percentage points to 5.6% in 1H25 [3] - The sales expense ratio slightly decreased by 0.1 percentage points to 1.5%, while the management expense ratio increased by 0.03 percentage points to 2.0% [3] - The financial expense ratio was -2.8%, improved from -0.6% in the previous year, mainly due to increased foreign exchange gains [3] - Research and development expense ratio decreased by 0.5 percentage points to 4.9% [3] Cash Flow and Balance Sheet - As of the end of 2Q25, accounts receivable and notes totaled 2 billion yuan, an increase of 7.5% from the beginning of the year [3] - Inventory stood at 1.17 billion yuan, up 9.0% from the start of the year [3] - The net cash flow from operating activities for 1H25 was 70 million yuan, down from 290 million yuan in the same period last year [3] Investment Outlook - The company is one of the few private enterprises in China capable of providing specialized alloy precision ring forgings for high-end equipment such as aircraft engines and space launch vehicles [4] - With ongoing fundraising projects and capacity expansion, the company is expected to benefit from high demand in aerospace and new energy sectors [4] - Projected net profits for 2025 to 2027 are 321 million yuan, 393 million yuan, and 465 million yuan, with corresponding price-to-earnings ratios of 28x, 23x, and 20x [4]

Investment Rating - The report maintains a "Recommended" rating for the company [6] Core Views - The company reported a revenue of 3.21 billion yuan in 2024, a year-over-year decrease of 11.21%, and a net profit attributable to shareholders of 0.26 billion yuan, down 46.4% year-over-year. The first quarter of 2025 showed signs of recovery with a revenue of 0.77 billion yuan, up 2.9% year-over-year, and a net profit of 0.077 billion yuan, up 5.5% year-over-year [1][2] - The company is one of the few private enterprises in China capable of providing precision ring forgings for high-end equipment in aerospace, rocket, and gas turbine sectors. With ongoing fundraising projects and capacity release, it is expected to benefit from high demand in aerospace and new energy sectors [3][2] Summary by Sections Financial Performance - In 2024, the company experienced a decline in revenue from aerospace and petrochemical forgings, with aerospace forging revenue at 0.84 billion yuan (down 25.6% YOY) and petrochemical forging revenue at 0.62 billion yuan (down 33.6% YOY). However, power forgings saw revenue growth of 28.6% YOY, reaching 1.11 billion yuan [2] - The company's gross margin decreased by 5.2 percentage points to 18.7% in 2024, with a net margin down by 5.4 percentage points to 8.2%. The fourth quarter of 2024 marked the lowest profitability for the year, with a gross margin of 12.1% [1][2] Cost and Cash Flow - The company's operating expenses decreased by 6.7% to 0.29 billion yuan in 2024, but the expense ratio increased by 0.4 percentage points to 8.9%. The net cash flow from operating activities improved significantly to 0.59 billion yuan in 2024 from 0.14 billion yuan in 2023 [3][1] Future Projections - The company is projected to achieve net profits of 0.32 billion yuan, 0.39 billion yuan, and 0.46 billion yuan for the years 2025, 2026, and 2027, respectively, with corresponding price-to-earnings ratios of 21x, 17x, and 15x [3][5]