Industry Overview - In the first half of 2025, China's primary magnesium production was approximately 476,800 tons, a year-on-year decrease of about 2.19% [1] - Total exports of various magnesium products reached around 221,500 tons, down 6.18% year-on-year [1] - Magnesium prices fluctuated between 15,000-17,000 RMB/ton (including tax), with the magnesium-aluminum ratio dropping to a historical low of 0.8-0.9, highlighting the cost-effectiveness of magnesium materials [1] Company Resource Status - Subsidiary Chao Lake Bao Magnesium holds white marble mineral resources with a reserve of 90 million tons, currently in operation [2] - Subsidiary Wutai Bao Magnesium has white marble mineral resources with a reserve of 580 million tons [2] - The company’s associate Anhui Bao Magnesium possesses white marble mineral resources with a reserve of 1.3 billion tons, which is not yet in production [2] - Gansu Bao Magnesium's subsidiary has quartzite mineral resources with a reserve of 2.95 million tons, with mining rights obtained and expected to commence in Q4 2025, which will effectively reduce silicon iron production costs [2] Automotive Sector Applications - Magnesium prices have remained lower than aluminum prices, accelerating the penetration of magnesium in automotive lightweighting [3] - Die-casting plants are increasingly adopting magnesium die-casting, including some aluminum die-casting companies [3] - New energy vehicle companies, including brands like Geely and SAIC, are increasing the use of magnesium products, with some vehicles using over 20 kg of magnesium per unit, potentially reaching 50-100 kg with larger magnesium die-cast components [3] Robotics Industry Applications - Magnesium alloys enhance the robotics industry with advantages such as lightweight, speed, stability, and cost-effectiveness [4] - The use of advanced magnesium alloy materials reduces the weight of similar components, improves operational speed, and extends the lifespan of robotic joints due to superior thermal conductivity [4] - The company has established a robotics business working group to engage with clients and promote magnesium applications [4] Electric Bicycle Applications - Magnesium's lightweight, electromagnetic shielding, and vibration damping properties are being utilized in electric bicycles [6] - Leading electric vehicle manufacturers like Aima and Yadea are incorporating magnesium alloy components, resulting in reduced weight and improved range and shock absorption [6] - The adoption of magnesium alloys is expected to lower production costs and enhance competitiveness against aluminum alloys [6]

Investment Rating - The investment rating for the company is "Accumulate" with a target price of CNY 18.17, representing a potential upside of 14.3% from the current price of CNY 15.9 [6][12]. Core Viewpoints - The company has established a dual-engine development model driven by lightweight automotive metal components and general aviation aircraft manufacturing, positioning itself as a leader in several niche markets [2]. - The low-altitude economy is expected to grow significantly, with the company poised to benefit from this trend through its recent acquisition of Volocopter, which enhances its capabilities in the eVTOL sector [10][11]. - The automotive lightweight metal components business is anticipated to grow steadily, supported by the development of the new energy vehicle industry, while the general aviation and eVTOL sectors are expected to thrive in the emerging low-altitude economy [12]. Financial Performance Summary - In 2024, the company achieved revenue of CNY 16.264 billion, a slight increase of 0.35% year-on-year, while net profit decreased by 10.14% to CNY 653 million [3][4]. - The automotive lightweight metal components segment generated revenue of CNY 13.450 billion, accounting for 82.7% of total revenue, with a minor decrease in its share [3]. - The gross margin for 2024 declined by 3.8 percentage points to 16.53%, with the automotive lightweight components and general aviation segments experiencing significant margin pressures [4]. - For Q1 2025, the company reported revenue of CNY 3.567 billion, a year-on-year increase of 0.75%, and a net profit of CNY 275 million, reflecting a growth of 21.3% [5]. Business Segment Analysis - The automotive lightweight metal components business saw a revenue increase of 0.09% year-on-year, with new energy vehicle-related revenue reaching CNY 3.28 billion [3]. - The general aviation business generated CNY 2.814 billion in revenue, marking a year-on-year growth of 1.62% [3]. - The company’s cost control measures resulted in a reduction of the total expense ratio by 1.84 percentage points to 8.92% [4]. Market Outlook - The low-altitude economy is projected to exceed CNY 1 trillion in scale by 2026 in China, with the global low-altitude economy expected to surpass USD 1 trillion by 2040 [11]. - The company aims to integrate Volocopter's advanced eVTOL technologies with its existing manufacturing capabilities to create a comprehensive product matrix, including fixed-wing aircraft, vertical take-off and landing vehicles, and drones [10].