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PayMEmf   Wednesday, 06/30/21 01:24:42 PM
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Eontec production

Yian Technology (300328.SZ)
R&D and upgrade-magnesium aluminum alloy, liquid metal, and medical magnesium materials work together
Securities Research Report | First Coverage Report May 26, 2021
Core Aspects:
Industry leader in the fields of magnesium aluminum alloy, liquid metal, and medical magnesium materials. The company has a complete magnesium-aluminum alloy industry chain, based on its main business, has a position in the fields of liquid metal and medical magnesium materials, and builds a new growth point for the company. Its subsidiaries Yihao Metal and Meian Medical are the company’s "main battlefields" for liquid metal and medical magnesium materials.
Liquid metal will bring about the third material industrial revolution, and the company masters formulas and core patents for die-casting. 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 advancement of die-casting technology, it currently has the potential for mass production and has the ability to form complex structures at one time. The cost efficiency advantage is significant. The company holds the core patents of liquid metal formulas and process equipment. LQMT (United States), a subsidiary of Hong Kong Liquid Metal Co., Ltd., which is 100% owned by the chairman, has played a synergistic role with the company to consolidate the company's leading position in Liquid Metal. The zirconium-based liquid metal material has been officially selected as an important material for the hinge of Huawei's second-generation folding screen mobile phone Mate Xs. With the promotion of zirconium-based metal applications, the company's product market has a broad space.
Biodegradable medical magnesium alloys benefit orthopedic patients, and the clinical and industrialization process is advancing steadily. Magnesium is a major element of the human body, which can be degraded and absorbed after implanted in the human body, avoiding the pain and risk of secondary surgery, and its mechanical properties are close to that of human bone tissue; and magnesium ions can promote bone formation and accelerate the rate of bone formation, and the cost is lower than traditional titanium alloys Material, so it has obvious advantages in orthopedics applications. The company's domestic clinical trials of high-purity magnesium bone nails are steadily advancing, and they have successfully obtained the EU CE certification and the right to enter the EU market. In the future, they will open up a tens of billions of blue ocean market.
Hold (first time)
Stock information
Industry Industrial Metal
Closing price on May 25 (yuan) Total market value (million yuan) Total share capital (million shares) Of which free float (%)
30-day average daily trading volume (million shares)
6.33 4,370.38 690.42 98.61 5.18
CSI 300
Stock price trend
64% 48% 32% 16%
0% -16% -32% -48%
Yian Technology
New energy vehicles accelerate the process of lightweight vehicles, and join hands with Yunhai Metal to create an aluminum-magnesium alloy “Yangtze River Delta + Pearl River Delta” layout. Magnesium aluminum alloy is a lightweight structural material for automobiles. At present, new energy vehicles generally have problems such as overweight and short cruising range. Increasing the proportion of lightweight materials in the entire vehicle is an effective way to increase the cruising range of new energy vehicles. The development of the new energy vehicle industry, The introduction of national policies such as environmental protection will accelerate the process of automobile lightweighting. In 2020, the second phase of the company’s “Chaohu Yi’an Yunhai Light Alloy Precision Die Casting Production Base Project” will be completed (the first phase will be put into production in 2017), achieving stable supply of raw materials and the location advantage of the “Pearl River Delta + Yangtze River Delta” dual center layout. Enter the supply chain of well-known domestic and foreign customers such as BYD and Tesla.
Investment advice: The company’s liquid alloy masters the core formula and equipment patents, and the zirconium-based liquid metal cuts into the core mobile phone manufacturer’s supply chain. It is expected to open up the company’s business profit growth point; on the other hand, the company’s new energy vehicle light
We have accumulated rich experience and R&D advantages in quantitative materials, and our products have successfully entered the supply chain of well-known customers at home and abroad, and are expected to enjoy incremental market gains in the future. The company has accumulated and first-in-class advantages in the industrialization of medical magnesium alloys, and the industrial value of magnesium alloys is expected to be realized after the clinical promotion of medical magnesium alloys. We expect the company’s net profit attributable to the parent company to be 0.41, 0.55, and 74 million yuan in 2021-2023, corresponding to 107.4, 80.0, and 59.1 times of PE. Considering that the company’s current business is still in the early promotion stage, there is still uncertainty in subsequent performance growth. The first coverage is given a "hold" rating.
Risk warning: orders for related new materials are lower than expected; the industrialization of liquid metal is not as expected; the performance of the main business of magnesium and aluminum alloy is not as good as expected; the clinical application of medical magnesium alloy is slower than expected.
Author
2020-05 2020-09 2021-01
2021-05
Analyst Wang Qi
Practicing Certificate Number: S0680521030003 Email: wangqi3538@gszq.com Research Assistant Liu Simeng Email: liusimeng@gszq.com
Related research
Financial indicators 2019A 2020A Operating income (million yuan) 1,025 945 Growth rate yoy (%) 4.0 -7.8 Net profit attributable to parent (million yuan) 103 16 Growth rate yoy (%) 90.2 -84.3 EPS latest dilution (yuan/share) 0.15 0.02 Return on net assets (%) 5.8 1.2 P/E (times) 45.7 290.4 P/B (times) 3.6 3.6
2021E 2022E 2023E
1,188 1,524 1,905 25.6 28.3 25.0 41 55 74 151.5 34.2 35.4 0.06 0.08 0.11 3.0 3.9 5.1 107.4 80.0 59.1 3.6 3.5 3.4
Source: Wind, Guosheng Securities Research Institute
Note: The stock price is the closing price on May 25, 2021. Please read the statement on the last page of this report carefully

May 26, 2021
Financial statements and key financial ratios
Balance sheet (million yuan)
Fiscal year 2019A 2020A 2021E 2022E 2023E
Income statement (million yuan) Accounting year operating income
Operating costs Operating taxes and additional operating expenses
Management costs
R&D expenses
Financial expenses
Asset impairment loss
Other income
Gains from changes in fair value
Net investment income
Asset disposal income
operating profit
Non-operating income
Operating expenses
The total profit
Income tax
Net profit
Minority shareholder gains and losses
Net profit attributable to the parent company
EBITDA EPS (yuan/share)
Main financial ratio
Fiscal year
Growth capacity Operating income (%) Operating profit (%) Net profit attributable to the parent company (%) Profitability
Quick ratio
Operating capacity
2019A 2020A 2021E 2022E 2023E
1025 945 1188 1524 1905 809 748 933 1190 1486 7 6 9 11 14 59 37 44 55 67 83 85 101 125 150 57 71 59 76 95
2 5 14 27 47 -8 -11 3 2 -8
9 12 0 0 0
0 0 0 0 0
2 1 1 1 1 36 -1 0 0 0 46 -11 26 39 55 52 30 24 28 33 0 1 1 1 0 97 19 49 66 88 12 1 5 6 8 85 18 44 59 80 -19 1 3 5 6 103 16 41 55 74 162 94 133 181 229 0.15 0.02 0.06 0.08 0.11
2019A 2020A 2021E 2022E 2023E
4.0 -7.8 25.6 28.3 25.0 16.5 -123.9 337.6 49.2 42.8 90.2 -84.3 151.5 34.2 35.4
21.1 20.8 21.5 21.9 22.0 10.1 1.7 3.4 3.6 3.9 5.8 1.2 3.0 3.9 5.1 5.3 1.2 2.6 3.5 4.2
28.0 30.2 41.8 47.8 56.3 -4.1 -1.1 18.5 32.3 53.2 2.22.21.51.31.1
Current assets 1019 Cash 329 Notes and accounts receivable 321 Other receivables 84 Prepayments 6 Inventories 210 Other current assets 69 Non-current assets 1011 Long-term investments 0 Fixed assets 622 Intangible assets 40 Other non-current assets 349 Total assets 2031 Current liabilities 474 Short-term borrowings 108 Notes and accounts payable 228 Other current liabilities 139 Non-current liabilities 94 Long-term borrowings 56 Other non-current liabilities 38 Total liabilities 568 Minority shareholders' equity 147 Share capital 460 Capital reserves 462 Retained earnings 390 Attributable to shareholders' equity of the parent company 1316 Liabilities and shareholders' equity 2031
Cash flow statement (million yuan)
Fiscal Year 2019A
Cash flow from operating activities 108
Net profit 85
Depreciation and amortization 65
Financial expenses 2 Investment loss -2-1-1-1-1 current ratio
977 1323 1491 364 353 453 329 488 560 46 117 92
8 10 13 165 290 308 65 65 65 1112 1246 1424 23 45 68 743 856 1013 48 49 50 298 295 294 2089 2568 2915 435 888 1187 136 447 740 213 336 365 86 104 82 196 186 205 93 97 110 103 89 94 632 1074 1392 166 170 174 690 690 690 232 232 232 369 396 432 1291 1325 1348 2089 2568 2915
1996
566
750
169
16
431
65
1627
90
1185
48
304
3624
1817
1182
510
125
223
127
95
2039
181
690
232
480
1403
3624
2020A 2021E 2022E
2023E
Gross profit margin (%) Net profit margin (%) ROE(%) ROIC(%)
Working capital changes
Other operating cash flow
Cash flow from investing activities
Capital expenditures
Long-term investment
Other investment cash flow
Cash flow from financing activities
short-term loan
Long term loan
Increase in common stock
Increase in capital reserve
Other financing cash flow
Net increase in cash
-32 96 -10 13 -129 -173 196 157 -20 -60 47 -76 -4 15 -22 28 -37 37
0 230 0 -230 55 -51 -25 41
-196 -65 -210 0 0 0 -209 -269 -302 112 156 181 -23 -23 -23 -120 -136 -144 -65 -34 -45 -14 2 -2
4 13 17
0 0 0
0 0 0 -55 -50 -60 -337 -191 -330
1.6
0.15
P/E 45.7 P/B 3.6 EV/EBITDA 29.6
1.7 1.1 0.9 0.8
0.5 0.5 0.6 0.6 2.9 2.9 2.9 2.9 3.4 3.4 3.4 3.4
0.02 0.06 0.08 0.11 0.30 -0.09 0.16 0.02 1.87 1.92 1.95 2.03
290.4 107.4 80.0 59.1 3.6 3.6 3.5 3.4 51.5 38.7 29.5 24.9
205 -63 112 18 44 59 73 76 92 5 14 27
17
80 Solvency
100 Gearing ratio (%) 47 Net gearing ratio (%)
Turnover rate of total assets
Accounts receivable turnover rate
Accounts payable turnover rate
Index per share (yuan) Earnings per share (latest dilution) Operating cash flow per share (latest dilution) 0.16 Net assets per share (latest dilution) 1.91 Valuation ratio
0.5 2.8 3.2
Source: Wind, Guosheng Securities Research Institute
Note: The stock price is the closing price on May 25, 2021
P.2
Please read the statement on the last page of this report carefully

Content directory
1. Yian Technology: Industry leader in the fields of magnesium aluminum alloy, liquid metal, and medical magnesium materials............................. ................................................5 1.1 The company is a pioneer & leader in the global large-scale magnesium-aluminum alloy die-casting industry... .................................................. ...5 1.2 Yi'an Technology's core competitiveness-technology research and development and industrial integration work together............................... .................................................. ...7 1.3 The three major business segments go hand in hand and continue to improve the industrial chain layout........................ .................................................. .........7 1.4 Operating income has declined for the first time since its listing, and the volume of liquid metal has risen sharply......................... .................................................. ................8
2. Liquid metal will bring about the third material industrial revolution... .................................................. ........................10 2.1 Liquid metal has the potential to replace traditional alloys, and the company continues to expand downstream applications.......... .................................................. .........10 2.2 Liquid metal folding screen hinges open new market space............................. .................................................. .......................12 2.3 The production of bulk amorphous alloys is relatively difficult, and large-scale bulk amorphous alloys still need technological breakthroughs...... .................................................. 13 2.4 The company's amorphous alloy is in a leading position in China........................ .................................................. ............14
3. Biodegradable medical magnesium alloys benefit orthopedic patients... .................................................. ...18 3.1 Biodegradable medical magnesium alloys have obvious advantages in orthopedic applications... .................................................. ...18 3.1.1 Compared with traditional titanium alloys, stainless steel and other alloy materials, magnesium alloys have significant advantages... .................................................. ...18 3.1.2 High purity magnesium VS magnesium alloy: single element, stable degradation rate ... .................................................. .........19 3.2 The successful clinical trials of medical magnesium bone nails will open up the tens of billions of medical equipment market...... .................................................. ...19 IV. New energy vehicles support the magnesium-aluminum light alloy business sector............................... .................................................. .................................. 21 4.1 Lightweight cars open up the market space of magnesium-aluminum alloys, and new energy vehicles are expected Accelerate the lightweight process................................... 21 4.2 Yi'an Yunhai Project is completed, "Realizing the Yangtze River Delta + Pearl River Delta" layout....... .................................................. ...23 V. Earnings Forecast and Investment Recommendations... ..................................... .................................................. ...24 5.1 Earnings forecast assumptions........ .................................................. .................................................. ..................... 25 5.2 Investment advice......................... .................................................. .................................................. .........26 Risk Warning.......................... .................................................. .................................................. ................................ 26
Chart catalog
Chart 1: The company has a wide range of downstream applications... .................................................. .........5 Chart 2: Zhuzhou Municipal People's Government State-owned Assets Supervision and Administration Commission is appropriate Ann Technology Real Holdings East................................... ..........................6 Chart 3: Based on magnesium-aluminum alloy die-casting as its main business, it will use liquid metal and medical magnesium materials to build new growth .................................................. ...7 Chart 4: The company's operating income has declined (100 million yuan) .......... .................................................. ............................8 Exhibit 5: 2020 The company's net profit attributable to its parent has dropped sharply (100 million yuan) ... .................................................. .....8 Chart 6: The company's liquid metal revenue accounts for about 13% (%) of the company's revenue ........... .................................................. ...9 Chart 7: Liquid metal receivables increase rapidly (million yuan)............. .................................................. ................................................9 Chart 8: In 2020, the company's liquid metal will contribute 33% of gross profit (%) ... .................................................. ..........9 Figure Table 9: The company's R&D investment continues to increase (ten thousand yuan)...................................... .................................................. ........................10 Figure 10: R&D expenses as a proportion of operating income have risen steadily (100 million yuan) ........ .................................................. ..........10 Chart 11: Domestic and overseas revenue share (%) .. .................................................. .................................................. ...10 Exhibit 12: The gross profit margin of overseas business in 2020 is lower than domestic (%)... .................................................. .....10 Chart 13: Liquid metal mechanical properties are better than common materials... .................................................. .................................................. ........11 Figure 14: A wide range of applications for liquid metals............ .................................................. ........................................12 Figure 15: Huawei Mate Xs triggers a folding screen Mobile phone blowout... .................................................. 12 Chart 16: Smartphone shipments enter the platform period (100 million units) ... ............ .................................................. .......13 Chart 17: Folding screen mobile phone market has entered a period of rapid growth (US$100 million).......................... .................................................. ...........13 Chart 18: Bulk amorphous alloy production process............................ .................................................. .............................................14 Chart 19: Appropriate Antech's strategic layout of liquid metal............................................ .................................................. .......................16
May 26, 2021
P.3 Please read the statement on the last page of this report carefully

May 26, 2021
Figure 20: The company is actively deploying liquid metal formulas and process equipment patents...... .................................................. ...16
Chart 21: Vacuum Die Casting Patent... .................................................. ..................................... 17
Chart 22: Continuous Rotary Die-casting Molding Equipment... .................................................. ...............................17
Figure 23: Estimated production capacity of the industrialization expansion project of amorphous alloy precision structure construction... .................................................. .....17
Chart 24: Magnesium is close to the mechanical properties of human bone tissue... .................................................. ........................19
Figure 25: The first case of pure magnesium bone nail applied to femoral necrosis with vascularized bone flap transplantation.............................. .................................................. ...19
Chart 26: Common joint fractures........................................... .................................................. ........................................19
Figure 27: 99.999 high-purity magnesium bone nail........................................... .................................................. ....................................20
Figure 28: Market scale of trauma physiotherapy consumables field (100 million yuan) ... .................................................. .................20
Figure 29: The proportion of my country's aging population continues to rise (million people) ................................... .................................................. ...............20
Figure 30: The amount of magnesium used in domestic bicycles still has a lot of room for growth... .................................................. .....................twenty one
Figure 31: Magnesium alloy has the advantages of light weight and high density............ .................................................. ......................twenty one
Figure 32: The amount of aluminum used by bicycles in my country (kg) is lower than the level of foreign companies... .................................................. ..................twenty two
Chart 33: The amount of magnesium used in bicycles in my country (kg) is lower than the level of foreign companies... .................................................. ..................twenty two
Figure 34: my country's new energy vehicle sales and growth rate (10,000 units) ... .................................................. ......................twenty two
Chart 35: The company's magnesium-aluminum alloy equipment... .................................................. ................................twenty three
Figure 36: The company's auto parts products... .................................................. ..................................... twenty three
Figure 37: Yi'an Yunhai Light Alloy Precision Die Casting Production Base Project Estimated Capacity ... .................................................. ..twenty four
Figure 38: Forecast of company profit and main cost subjects (100 million yuan) ........................... .................................................. ..............25
Exhibit 39: Valuation Table of Comparable Companies... .................................................. .........................................26
P.4 Please read the statement on the last page of this report carefully

Chart 1: The company has a wide range of downstream applications
1. Yian Technology: Industry leader in the fields of magnesium aluminum alloy, liquid metal, and medical magnesium materials
1.1 The company is a pioneer & leader in the global large-scale magnesium-aluminum alloy die-casting industry
The company is one of the earliest companies in the world to deploy large-scale magnesium-aluminum alloy die-casting equipment, and has a complete industry chain of magnesium-aluminum alloy research and development, design, production and sales. On the other hand, the company's card slots are deployed in the fields of liquid metal and medical magnesium materials, building a new growth point for the company. Yian Technology was established in May 1993, specializing in the research and development, design, production and sales of magnesium alloy, aluminum alloy and other light alloy precision die castings, mainly used in 3C, LED, medical equipment, auto parts, power tools, Industrial accessories and other fields. On the basis of the original business scale, the company currently focuses on the development trend of new material industries such as liquid metal, biodegradable medical magnesium alloy, new energy vehicles, 5G, etc., intensifies scientific and technological research and development, and actively expands the layout of new products and new businesses. , To achieve a systematic combination of technology and products to enhance the company’s endogenous growth momentum; the company’s liquid metal products have successfully entered Huawei’s supply chain system; medical magnesium bone nails have begun domestic clinical trials and are expected to gradually begin market launch.
May 26, 2021
Source: Yi'an Technology Company's official website, Guosheng Securities Research Institute
P.5
Please read the statement on the last page of this report carefully
The legal representative of the company is Yang Jiedan, the actual controller is the State-owned Assets Supervision and Administration Commission of Zhuzhou Municipal People’s Government (Zhuzhou State-owned Assets Supervision and Administration Commission), and the controlling shareholder is Zhuzhou State-owned Assets Holding Group Co., Ltd. Public offering of 50 million shares, after the transfer of 78.75 million shares of the company held by Yian Industrial, the accumulated shareholding ratio of the company is 27.97%. The second largest shareholder is Hong Kong Yian Industrial Co., Ltd., with a shareholding ratio of 20.41%. Founded in 1984, the legal representative is Li Yangde, the current chairman of Yian Technology.
Zhuzhou International Investment Corporation was established in January 2010. Its business scope is investment and operation of state-owned assets; investment and operation of urban infrastructure and rural infrastructure construction. It actively develops key projects around Zhuzhou’s "four cities and three bases" and 100 billion industrial clusters. Equity investment, etc. Up to now, there are 35 invested companies, including 7 wholly-owned subsidiaries. Inion Technology can take advantage of Zhuzhou SDIC's holdings to promote the manufacturing industry of Zhuzhou SDIC and the company's liquid metal and new energy vehicle lightweight metal production.
Manufacturing technology is better integrated.

May 26, 2021
Subsidiaries: Yi'an Technology has 18 domestic holding subsidiaries for scientific research, processing, production, and sales. Among them, Chaohu Yi'an Yunhai cooperates with the parent company to further deepen the use of magnesium aluminum alloy lightweight materials for automobiles; Yihao Metal and Mei'an Medical are the companies The "main battlefield" for liquid metal and medical magnesium materials: (1) Yihao Metal Material Technology Co., Ltd. (60% shareholding): Mainly engages in the smelting, processing and post-processing of amorphous alloy materials; (2) Mei'an Medical Equipment Co., Ltd. (100% shareholding): Responsible for R&D, production and sales: medical equipment, magnesium, aluminum alloy materials, magnesium alloy biological materials; (3) Opto Industrial Materials Co., Ltd.: mainly produces new organic silicone materials, Sales and research; (4) Yian New Material Research Institute Co., Ltd.: Responsible for the research and development and technical services, technical consultation, technology transfer, and new alloy materials of nano materials and liquid metals; (5) Chaohu Yian Yunhai Technology Co., Ltd.: Production and sales of magnesium alloy and aluminum alloy light alloy precision die castings.
Chart 2: State-owned Assets Supervision and Administration Commission of Zhuzhou Municipal People's Government
Source: wind, Guosheng Securities Research Institute, date as of May 13, 2021
Development history: Based on the main business of magnesium-aluminum alloy die-casting, we will use liquid metal and medical magnesium materials to build new growth. The company was established in 1993, based on magnesium-aluminum alloy die-casting equipment, and currently has 4200T and 3500T large-scale die-casting equipment. Based on its own industry, Yian Technology continues to explore new areas. The company is the earliest enterprise in the industry to conduct liquid metal research and development. It has focused on liquid metal research and development and industrialization for 10 years. In 2014, Yihao Metal was established and it was the first to go offline that year. This liquid metal dual card tray has opened up new growth space for folding screen liquid metal hinges, new energy auto parts, 3C, and medical equipment. In addition, in 2008, the company began to develop 99.999% high-purity magnesium for orthopedic implants. In 2010, Mei'an Medical Devices Co., Ltd. was established to be responsible for the development and production of magnesium alloy biomaterials and medical devices. The company’s degradable magnesium bone internal fixation screws have been received by the European Union. CE certification and actively promote sales, and the domestic clinical trials of medical magnesium bone nails have been steadily promoted.
P.6
Please read the statement on the last page of this report carefully

Chart 3: Based on magnesium-aluminum alloy die-casting as its main business, it will focus on liquid metal and medical magnesium materials to build new growth
May 26, 2021
Source: Company announcement, Guosheng Securities Research Institute
1.2 Yi'an Technology's core competitiveness-technology research and development and industrial integration work together
The company's founder and chairman Mr. Li Yangde laid the company's core competitiveness driven by technological innovation and R&D. Mr. Li Yangde graduated from Tsinghua University with a master's degree in management. He also serves as a doctoral supervisor at the University of Science and Technology Beijing and Shanghai Jiaotong University. He is also an adjunct professor at Huazhong University of Science and Technology and Ningxia University of Science and Technology, a visiting professor at Xiangfan University, and a distinguished professor at Jiamusi University. He has published more than 10 academic papers and a number of invention patents. And it has established close ties with top scientific research institutes such as the Chinese Academy of Sciences, Shenyang Institute of Metals, Changchun Institute of Applied Chemistry, and Shenzhen Advanced Institute.
In 2016, Hong Kong Liquid Metal Co., Ltd. controlled by Li Yangde, Chairman of Yian Technology, invested in Liquidmetal (Liquidmeta, LQMT) in the United States. Li Yangde became the chairman of the company and currently owns 46% of the shares in LQMT.
1.3 The three major business sectors go hand in hand and continue to improve the industrial chain layout
The company takes liquid metal, biodegradable medical magnesium alloy, and magnesium-aluminum automotive products as the three key business sectors. It has a complete industrial chain and can provide customers with integrated mold design and manufacturing, die-casting molding, precision CNC processing, spraying, and testing. Service capability. The product range includes: consumer electronics, high-end LED curtain walls, medical equipment, auto parts, communication equipment, large structural parts, etc. In terms of magnesium and aluminum alloys, the company has 4200T and 3500T and other large-scale die-casting equipment, which has greater advantages in the integrated molding of large-scale parts of new energy vehicles; in terms of liquid metal, as an early liquid metal research and development enterprise in the industry, it has Full-process capabilities such as liquid metal synthesis design, smelting, mold processing, machining, and vacuum die-casting. It has the largest amorphous alloy production line in China; in terms of medical magnesium alloys, the company's medical magnesium bone nails have obtained the EU CE certification and are steadily advancing in China Clinical Trials.
Since its establishment, the company has always adhered to the development idea of ??scientific and technological innovation. By the end of 2020, the number of R&D personnel reached 394. It has established the Guangdong Light Alloy Engineering Technology Research and Development Center, the Guangdong Academician Expert Workstation, and the Guangdong International Science and Technology Cooperation Base. At the same time, the company has continuously strengthened the "production, study and research" cooperation between universities and research institutes. The company has obtained a total of 192 patents and 49 new ones in 2020. It has built technical barriers through patent layout, continuously increased R&D investment, and increased R&D expenses by more than 20%.
P.7
Please read the statement on the last page of this report carefully

May 26, 2021
1.4 Operating revenue has declined for the first time since its listing, and liquid metal volume has risen simultaneously
Operating income fell for the first time since listing, and net profit attributable to the parent company decreased by 84.27% year-on-year: 2016-2019, the company's operating income increased from 563 million yuan to 1.025 billion yuan, with a CAGR of 16%; net profit attributable to the parent increased from 31 million yuan to 103 million Yuan, the CAGR is 35%.
In 2020, the company's operating income was 945 million yuan, a year-on-year decrease of 7.77%, and net profit attributable to the parent was 16.21 million yuan, a year-on-year decrease of 84.27%; both the decline in revenue and net profit was mainly due to the epidemic affecting the company’s upstream and downstream customers to resume work and production, and overseas epidemics As a result, exports were blocked and the company's overall performance was dragged down. Expensive R&D expenses increased by RMB 13.53 million. Due to the demolition of the Shenzhen-Ganxi high-speed railway, the company confirmed revenue of 72.58 million yuan in 2019, and confirmed net income of 21.97 million yuan in 2020, a year-on-year decrease of 50.6 million yuan. The demolition caused the company's amorphous alloy precision structural parts industrialization expansion project to be postponed for one year, dragging it down The progress of the company's expansion project.
Figure 4: The company's operating income has declined (100 million yuan) Figure 5: The company's net profit attributable to the parent in 2020 has dropped significantly (100 million yuan)
1.2 1 0.8 0.6 0.4 0.2 0
2015
100% 50% 0% -50% -100%
Net profit attributable to the parent
Year-on-year
2016
2017
2018
2019
2020
Source: Company announcement, Guosheng Securities Research Institute
12 10 8 6 4 2 0
2015
50% 40% 30% 20% 10% 0% -10% -20%
Operating income year-on-year
2016
2017
2018 2019
2020
Source: Company announcement, Guosheng Securities Research Institute
In 2020, liquid metal revenue increased by 68% year-on-year, becoming the company's largest source of gross profit: From the perspective of the company's revenue structure, the liquid metal business accounted for 13% of operating revenue in 2020 to 123 million yuan, an increase of 68% year-on-year, mainly due to folding The revenue of screen hinges increased, and the gross profit margin of the liquid metal sector reached 53.49%, contributing 33% of the company's gross profit and becoming the company's largest source of gross profit. Liquid metal is the company’s current key development direction, with excellent material properties. It has entered the fields of folding screen mobile phone metal hinges, new energy auto parts, consumer electronic structural parts, medical equipment, etc. It has a good market application prospect and opens up new opportunities for the company. Profit growth point.
The gross profit of aluminum products and magnesium products has dropped significantly: the company's aluminum-magnesium alloy business accounts for 61% of operating income. The gross profit margin in 2020 is only 8.0%, which is a significant drop of 18.5% compared to 2019. The company's magnesium products business revenue decreased by 20.5% year-on-year, and costs decreased by 11.3% year-on-year; aluminum product revenue decreased by 13.9% year-on-year, and costs decreased by 1.5% year-on-year. In the first half of 2020, affected by the epidemic, the company's magnesium-aluminum alloy product volume profit was under pressure. In the future, the company needs to further reduce costs and increase efficiency, and increase the proportion of high-margin products.
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Figure 6: The company's liquid metal revenue accounts for about 13% (%) of the company's revenue. Figure 7: Liquid metal receivables increase rapidly (million yuan)
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Magnesium products Aluminum products Bakelite products Other
Organic silica gel Liquid metal Proportion of liquid metal
13%
2015 2016
2017
2018 2019 2020
140 120 100
80 60 40 20
0
2015
80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20%
Liquid metal revenue YoY
2016
2017
2018
2019 2020
Source: Company announcement, Guosheng Securities Research Institute
Source: Company announcement, Guosheng Securities Research Institute
Continue to increase R&D investment and build a patent moat: Under the pressure of revenue and net profit, the company continues to increase R&D investment. In 2020, R&D investment is 81.12 million yuan, an increase of 33% year-on-year, and the proportion of R&D expenses in operating revenue has remained constant for a long time. Over 5%, it has increased steadily in the past three years, showing the company's determination to transform its products to high-end products. In 2020, the company added 49 authorized patents, and currently has a total of 192 patents. In 2017, the company invested 35 million yuan to establish New Materials Research Institute Co., Ltd. to increase R&D and technology investment in nanomaterials and amorphous alloys (liquid metals).
Figure 8: The company's liquid metal contributes 33% of gross profit in 2020 (%)
13%
Magnesium products
Aluminum products
Liquid metal
Organic silica gel
other
26%
17%
10%
33%
Source: Company announcement, Guosheng Securities Research Institute
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May 26, 2021 Chart 9: The company's R&D investment continues to increase (ten thousand yuan) Chart 10: The proportion of R&D expenses in operating income has increased steadily (100 million yuan)
9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000
0
2015
35% 30% 25% 20% 15% 10% 5% 0%
R&D investment year-on-year
2016
2017 2018
2019 2020
Source: Company announcement, Guosheng Securities Research Institute
12 10 8 6 4 2 0
2015
8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Operating income
R&D expenses/operating income
2016
2017
2018
2019
2020
Source: Company announcement, Guosheng Securities Research Institute
Figure 11: Proportion of domestic and overseas revenue (%)
The overseas business was dragged down by the epidemic, and the gross profit margin was lower than that of the domestic: Nearly half of the company’s revenue came from overseas. In 2020, affected by the overseas epidemic, the company’s export business was blocked. The proportion of overseas revenue in total revenue fell to 44%, a record low. With the popularization of vaccines and epidemic control, this state is not expected to continue. The company's overall gross profit margin has shown a downward trend in recent years. In 2020, the gross profit margin of overseas business was 14%, a record low, and domestically, it rose to 26%, mainly due to the increase in the proportion of high-margin liquid metals.
Figure 12: The gross profit margin of overseas business in 2020 is lower than that of domestic (%)
35% 30% 25% 20% 15% 10%
5% 0%
30% 29%
2015
29% 27%
2016
Overseas domestic
25% 2...
22% 20%
26%
14%
twenty four%
twenty two%
2017 2018
2019 2020
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
43%
57%
43%
57%
Overseas domestic
51%
49%
49%
51%
49%
51%
56%
44%
2015 2016 2017 2018
2019 2020
Source: Company announcement, Guosheng Securities Research Institute
Source: Company announcement, Guosheng Securities Research Institute
2. Liquid metal will bring about the third material industrial revolution
2.1 Liquid metal has the potential to replace traditional alloys, and the company continues to expand downstream applications. Liquid metal has the potential to replace traditional alloys:
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Amorphous alloys: Amorphous alloys are also called liquid metals, solid metals or alloys whose atoms are arranged in a long-range disorder and short-range ordered structure. The microstructure is very similar to that of glass, so it is called liquid metal. Amorphous alloy has high strength, high hardness, high elastic limit, good soft magnetic or hard magnetic properties, friction and wear resistance and corrosion resistance and other excellent physical and chemical properties, and its cooling and solidification shrinkage is small, and it has a good near-net shape Casting forming ability (high precision in one-time forming, which can save machining cost).
? Performance advantage: a new type of metal material with the characteristics of glass, metal, solid and liquid. Because there are no defects such as dislocation, stacking fault, grain boundary, etc., amorphous alloys show special mechanical properties, and their bending strength, tensile strength, elastic deformation, etc. are better than common materials (strength is more than 5 times that of conventional aluminum-magnesium alloys) , 7 series aluminum is 5 times, stainless steel is 3 times, titanium alloy is 2 times).
? Potential for mass production: Liquid metal can be produced through molds. A set of molds supports 30,000 to 40,000 products. At present, Yi'an Technology's products have high repeatability and accuracy can reach ±0.03mm. Compared with powder metallurgy, liquid metal The transverse and longitudinal shrinkage rate reaches 2.5-3.5 per thousand, and the powder metallurgy shrinkage rate is 22%-24%, which is more suitable for batch preparation of precision metal structures requiring high precision.
? Cost advantage: Liquid metal can form products with complex structures at one time through vacuum die-casting. Because of its good formability, it saves a lot of CNC (Numerical Control Processing) procedures and has a high cost performance. And due to the good material properties, compared with traditional materials, the same structural strength requires less liquid metal material consumption, and the cost advantage of scaled production is highlighted.
Figure 13: The mechanical properties of liquid metal are better than common materials
The four major sectors are working together to continue to expand the downstream application areas: the company’s largest liquid metal sector is liquid metal hinges for folding screen mobile phones. The company has the ability and strength to produce liquid metal hinges and has been applied to the two generations of folding machine products from the largest domestic mobile phone terminal manufacturer . The second largest segment is new energy auto parts. The company is the only company in the world that applies liquid metal to the automotive industry, and exclusively supplies Model X liquid metal door lock covers to Tesla. The third largest sector is consumer electronics structural parts. The company is one of the few suppliers in the industry that realizes the commercial use of liquid metal precision structural parts in the consumer electronics field. The liquid metal Face ID brackets and camera modules produced by the company have been sold to Xiaomi, OPPO and other well-known domestic mobile phone manufacturers supply in batches. The 5G era will accelerate the market penetration of liquid metals. The fourth sector is the medical device structural parts market. The company takes full advantage of various physical properties of liquid metal, actively expands the overseas medical device market, and cooperates with internationally renowned medical device companies for development. Medical device structural parts have entered trial production one after another. The product has achieved mass production.
Source: "Properties of Liquid Metal", Guosheng Securities Research Institute
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Figure 14: A wide range of applications for liquid metal
May 26, 2021
Source: Company's official website, Guosheng Securities Research Institute
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2.2 Liquid metal folding screen hinges open new market space
Huawei Mate Xs is released, zirconium-based liquid metal opens new profit growth points: On February 24, 2020, Huawei released the second folding screen mobile phone Huawei Mate Xs new product launch conference. The new machine support uses high-strength zirconium-based liquid metal. The friction parts adopt the metal injection molding (MIM) process, which has the advantages of high precision and lighter weight, which is expected to replace the traditional stamping + CNC production mode. The hinge is the most critical functional component for the realization of a foldable mobile phone, and it is also the part with the highest technological content in the folding screen. It needs to ensure precise limit, multiple opening and closing, damping protection and other functions. It also needs to have light weight, small size, and The requirements of stable performance, and the material properties and accuracy of liquid metal can meet the requirements. It is expected that in 2021, folding screen mobile phones will flourish. Samsung, Xiaomi, vivo, OPPO, and Google will all have a large number of folding screen mobile phones.
Figure 15: Huawei Mate Xs triggered a blowout release of folding screen mobile phones
Model Price (RMB) Time to market
Huawei Mate X 16999 2019/2/24
Huawei Mate Xs 16999 2020/2/24
Samsung Galaxy Z Flip 12499 2020/7/22
Samsung Galaxy Z Flod2 16999 2020/9/9
Motorola razr 12499 2020/9/10
Samsung W21 19999 2020/11/4
OPPO X 2021 Scroll Screen Concept Machine None 2020/11/17
Huawei Mate X2 17999 2021/2/22
Xiaomi MIX FLOD 9999-10999 2021/3/30
Source: Pacific Computer Network, Guosheng Securities Research Institute

May 26, 2021
The penetration rate of the folding screen mobile phone market is accelerating: The Institute of Information and Communications Technology released a March domestic mobile phone market analysis report: From January to March, the total domestic mobile phone market shipments totaled 97.973 million units, a year-on-year increase of 100.1%. In terms of the development of 5G mobile phones, from January to March, the domestic market's 5G mobile phone shipments were 69.846 million units and 64 new models were launched, accounting for 71.3% and 52.5% respectively. Digitimes predicts that the global folding screen market will reach USD 5.5 billion in 2020 and is expected to exceed USD 105.3 billion in 2025, with a compound growth rate of approximately 64% from 2020 to 2025.
Figure 16: Smartphone shipments enter the platform period (100 million units) Figure 17: Folding screen mobile phone market has entered a period of rapid growth (US$100 million)
1200
1000
800
600
400
200
1053 888
627
2019 2020 2021E 2022E 2023E 2024E 2025E
10 0
370 222
55
1,800 1,600 1,400 1,200 1,000
800 600 400 200
0
Shipments
Year-on-year
60% 50% 40% 30% 20% 10% 0% -10%
Source: Digitimes, Guosheng Securities Research Institute
2.3 The production of bulk amorphous alloys is relatively difficult, and large-scale bulk amorphous alloys still need technological breakthroughs
After nearly a hundred years of development, amorphous alloys have continuously enriched their alloy components: In 1934, German scientist Kramer first used meteorological deposition to prepare amorphous alloy films. In 1950, Brenner prepared a Ni-P amorphous alloy coating by electrodeposition to improve wear resistance and corrosion resistance, and was widely used in continuous casting and rolling molds in the iron and steel smelting industry. In 1987, the metal copper mold casting method used by the Institute of Metal Research of Tohoku University in Japan discovered La-Al-Ni-Cu (lanthanum series), Mg-Y-Ni-Cu (magnesium series) and Zr-Al-Ni-Cu (zirconium series), etc. A bulk amorphous alloy system with strong amorphous forming ability. Later, Peker and Mukherjee of the California Institute of Technology in the United States discovered the Zr-Ti-Cu-Ni-Be alloy system with superb amorphous forming ability through the method of doping with metal Be.
Bulk amorphous alloys are difficult to produce, and vacuum die-casting is suitable for thin-walled complex parts: amorphous alloys have metastable structure characteristics, and it is difficult to use conventional forging or welding processes for parts processing. The current feasible technical means is the use of blocks. The fluidity of bulk amorphous alloy is cast. Crystalline alloys are solidified under equilibrium conditions, and since rapid cooling is not required, the mold can be easily filled. Because of the metastable characteristics of amorphous alloys, the alloy liquid must freeze its liquid structure into a solid state at a very fast cooling rate, and there is no release of latent heat of crystallization during the process, which brings about the filling ability and fluidity of amorphous alloys. Problems, such as insufficient pouring and air pockets. In order to solve these problems, the current common technological methods are: superplastic forming, vacuum die casting (injection) forming, vacuum suction casting forming, water quenching method, copper mold adsorption method, directional solidification method and other processes.
Source: Institute of Information and Communications Technology, Guosheng Securities Research Institute
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

May 26, 2021
Figure 18: Production process of bulk amorphous alloy
Technical means Working principle
Examples Advantages
Disadvantage
Superplastic forming Die forging, hot extrusion, hot embossing.
It is suitable for micro-nano-scale manufacturing, such as: micro gears, low-cost fast-speed forceps, micro-scalpels (micro-replication. Meter level).
Oxidation and crystallization,
Sensitive to process parameters.
Place the granulated raw materials in a vacuum sealed chamber
Vacuum Die Casting After melting by electric induction heating, it is introduced into the injection (injection) molding sleeve, and the molten (EPV-HPDC) metal is pressed into the mold through the high-speed movement of the plunger, and then kept super high
Compression and solidification molding.
Suitable for complex and thin-walled
Thin-walled metal parts, such as: smart phone frame, notebook computer case, watch frame, earphones and other thin-walled parts.
The molding speed is high, and the solidification process only takes a few milliseconds, effectively avoiding gas
Defects such as holes and shrinkage.
Exist in different parts
Tiny pores may be caused by too fast filling; the technical difficulty is more complicated.
Vacuum suction casting
Place the casting mold in a closed container with negative pressure. The molten metal is sucked into the cavity and the negative pressure is removed after solidification.
It is suitable for the production of thin and fine small precision castings, such as cylinders, discs, and plate castings. Harmonic reducer flexible wheel (diameter up to 50mm, wall thickness 2mm).
Improve the filling ability of the alloy, the minimum wall thickness is 0.2mm, reduce the porosity, slag inclusion, etc.
defect.
Not applicable to shapes
Complex casting casting.
Water quenching
The alloy is placed in a quartz tube, and after melting, it is quenched into flowing water together with the quartz tube to achieve rapid cooling to form a bulk amorphous alloy.
Suitable for small block alloys, simple operation and manufacturing. The art is easy to control.
The equipment is expensive,
Prone to pores and quartz
The tube is easy to break.
After the parenting and financialization, the melt is sucked and casted from the crucible copper mold suction casting method into the water-cooled copper mold to form a
Large pieces of material of a certain shape and size.
Suitable for small size samples.
The copper mold has a fast cooling rate and preparation efficiency
high.
Prone to surface shrinkage, and the surface is not smooth enough.
Directional solidification
Control the directional solidification rate and the liquid phase temperature gradient in front of the solid/liquid boundary.
It is suitable for long samples with small cross-sectional area.
Effectively solve the long strip amorphous alloy flow
The problem of insufficient mobility.
Amorphous materials required
High forming ability.
Source: CNKI, "New Progress in Research on Casting and Forming of Bulk Amorphous Alloys", Guosheng Securities Research Institute
Current technology is difficult to achieve large-scale mass production of bulk amorphous alloys: limited by the manufacturing process of amorphous alloys, if the size is large, it is difficult to achieve amorphization inside, so there is a size limit (maximum critical size) in the manufacture of amorphous alloys . The maximum critical dimension of most types of amorphous alloys is within 10mm. The Pd-based alloy invented in 1997 reached 72mm. In 2019, Shen Baolong of Southeast University and others obtained non-gold alloy ingots with a maximum diameter of 16.52mm through arc melting and negative pressure direct cooling. , But there is still a big gap compared with other alloys, which limits the application of amorphous materials to a certain extent. In the future, with technological progress, bulk alloys are expected to break through the size limit of structural parts and realize the large-scale production of large super-strong structural parts.
2.4 The company's amorphous alloy is in a leading position in China
The earlier bulk amorphous alloy forming equipment in the world is the amorphous alloy injection equipment developed by Liquidmetal Technologies in the United States and ENGEI in Europe in 2015, but the forming equipment developed and manufactured by it is the company’s secret and is not external. Sales, so its details are not clear to the outside world. Huawei, BYD, Foxconn and Yi'an were among the earliest domestic companies that started industrializing bulk amorphous alloys. Since 2008, BYD has opened
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It exhibited the research and development of bulk amorphous alloy die-casting equipment, and obtained the authorized invention patent for amorphous alloy die-casting equipment. In 2019, the business scope of Shanwei BYD Electronics Co., Ltd. was changed to: production and sales of amorphous materials and products. Changzhou Shijing Liquid Metal Co., Ltd., in conjunction with a number of professional die-casting equipment manufacturers, has developed two series of amorphous alloy die-casting machines for mass production and service, and currently has a supporting capacity of 50 die-casting machines. In recent years, other domestic companies have also been involved in the R&D and manufacturing of non-gold alloy die-casting equipment, but so far, it is difficult to find a large number of related casting equipment in the market.
The company is a global leader in liquid metal: Yian Technology has started the industrialization of liquid metal in 2012 and has invested more than 300 million yuan so far. It has a large-scale zirconium-based amorphous alloy production line and currently has a production capacity of 45 machines. The company launched a "production-university-research" joint project in many universities within the United Nations. In 2014, Yi'an Technology and the Songshan Lake Institute of Metal Research of the Chinese Academy of Sciences jointly established a new materials research laboratory, which can share the National (Joint) Laboratory of Materials Science of the Institute of Metals of the Chinese Academy of Sciences The equipment resources, technical resources, etc. of the company provide stronger support for the technical research and product development of the enterprise. In 2016, the capital increased to hold Yihao Metal Material Technology Co., Ltd. to promote the rapid development of the liquid metal product business and continue to improve profitability. In 2017, the Yian New Materials Research Institute was established to be responsible for the research and development of nano materials and liquid metals. In the same year, United Anke Co., Ltd. and Hong Kong Liquid Metal Co., Ltd. invested in Chenglian Liquid Metal Equipment Co., Ltd. and developed the first liquid metal die casting machine in China. In 2020, Ningde Sanxiang Liquid Metal Co., Ltd. was established in conjunction with Sanxiang New Materials to conduct research and development and production of liquid metal through technical authorization and equipment procurement.
Continue to enhance the competitiveness of amorphous alloys through the layout of formulas, processes, and equipment patents: Yian Technology currently has 192 patents, and continues to strengthen the protection of liquid metal formulas, process equipment, etc., and continues to enhance the company’s competitiveness in the liquid metal field. The company will be new in 2020. 49 granted patents were added, 4 of which involved amorphous alloys. LQMT, a subsidiary of Hong Kong Liquid Metal Co., Ltd., has a wide range of formula, process and equipment patents, and forms complementary advantages with the existing patents of Yian Technology.
The chairman invested in Liquidmetal Technologies (LQMT), integrating technology and channel resources: In 2016, Hong Kong Liquidmetal Co., Ltd. controlled by Mr. Li Yangde became a shareholder of Liquidmetal Co., Ltd. (LQMT), and Mr. Li Yangde became the chairman of the company. LQMT has been engaged in liquid metal for more than 20 years, mainly engaged in liquid metal products such as consumer electronic equipment, medical products, auto parts, and sports and leisure products. In February 2013, LQMT licensed Apple to exclusively use all patents and intellectual property rights of its amorphous metal materials in the field of consumer electronics. LQMT, a subsidiary of Hong Kong Liquid Metal Co., Ltd., has a wide range of formula patents. In 2020, the company’s patent licensing revenue is 64,000 US dollars, accounting for 6.5% of revenue. Inan Technology announced that Hong Kong Liquid Metal Co., Ltd. will meet the requirements of LQMT. Under the conditions of turning losses into profits and other conditions, LQMT shares will be transferred to Yian Technology. In 2020, LQMT's operating income will be US$990,000 and net profit will be US$2.64 million.
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Figure 19: Yian Technology's strategic layout of liquid metal
May 26, 2021
Source: Wind, Guosheng Securities Research Institute Note: As of April 28, 2021
Figure 20: The company actively deploys liquid metal formulas and process equipment patents
Patent name Patent number Applicant
A high-toughness amorphous composite material and its preparation method and
application
ZL201510780752.9 Yian Technology, Mei'an Technology
An amorphous alloy with antibacterial function ZL201510710856.2 Yian Technology, Mei'an Technology
Amorphous alloy component casting molding equipment and process CN201310639470.8
Institute of Metal Research, Chinese Academy of Sciences, Yianke
Skill
3D printing equipment of amorphous alloy CN201811428856.3 Yian Technology, Mei'an Technology
An amorphous alloy vacuum mold ZL201620680655.2 Yian Technology
An amorphous alloy production device ZL201910099593.4 Yian Technology
Source: State Intellectual Property Office, Guosheng Securities Research Institute
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Figure 21: Vacuum Die Casting Patent
Figure 22: Continuous rotary die-casting molding equipment
Source: State Intellectual Property Office, Guosheng Securities Research Institute
Source: State Intellectual Property Office, Guosheng Securities Research Institute
Accelerated expansion of production capacity through partnership investment and technology transfer: We believe that the bottleneck of production capacity is the core problem that the company’s liquid metal business needs to solve at present. The company’s existing machines cannot support large-scale production. The industrialization expansion project of alloy precision structural parts" is mainly used for the production of consumer electronic product accessories. The total investment of the project is 300 million yuan, and an annual production capacity of 890 tons will be formed after it reaches full capacity. The previous expansion plan was delayed due to the demolition and relocation along the railway, and the project was postponed to May 30, 2021. The "Amorphous Alloy R&D Center Construction Project" planned during the same period was terminated. In March 2020, Yi'an and Sanxiang Zirconium Magnesium established "Ningde Sanxiang Liquid Metal Technology Co., Ltd." with a 40%:60% foreign investment. The alloy-related patents and know-how are licensed to Ningde Sanxiang for use. Ningde Sanxiang paid a technology license fee of RMB 40 million to Yi'an Technology and Yihao Metal. At the same time, Ningde Sanxiang purchased 10 sets of two types of liquid metal equipment from Yi'an Technology to rapidly expand production capacity.
Figure 23: Estimated production capacity of amorphous alloy precision structure construction industrialization expansion project
project
Material weight (kg)
Annual output (pieces)
Single card holder
Amorphous 0.005
10,000,000
Dual card tray
Amorphous 0.005
8,000,000
Shaft
Amorphous 0.008
15,000,000
phone case
Amorphous 0.04
900,000
Camera housing
Amorphous 0.025
2,000,000
Watch case
Amorphous 0.018
750,000
Rotating bracket
Amorphous 0.0015
12,000,000
Notebook hinge bracket
Amorphous 0.012
9,000,000
Notebook fixing bracket
Amorphous 0.024
9,000,000
Wearable device accessories
Amorphous 0.002
20,000,000
other
Amorphous 0.01
20,000,000
Source: Company announcement, Guosheng Securities Research Institute
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3. Biodegradable medical magnesium alloys benefit orthopedic patients
3.1 Biodegradable medical magnesium alloys have obvious advantages in orthopedics applications
Biodegradable medical magnesium alloys have been successfully used in orthopedic implants: Magnesium and its alloys as medical biomaterials can be traced back to 1878. Edward used pure magnesium wire as a ligature to ligate blood vessels to stop bleeding; until 1900, Payr proposed to use it. Pure magnesium is used as bone material. Lambotte used pure magnesium plates to treat lower limb fractures in 1907. Early clinical application studies have found that magnesium is biologically safe and can promote bone healing; however, because magnesium is degraded too quickly in the body, fractures have not healed, and internal fixation fails. After a long period of time, magnesium and magnesium alloys Clinical research has basically stopped.
The main problem is the excessively fast degradation rate and the generation of air pockets: Magnesium and magnesium alloys may cause insufficient fixation in the early stage of the patient's recovery period due to the excessively fast degradation rate and severe degradation morphology, and thus cannot bear the fixation of the bone mass of the load-bearing part; At the same time, due to the active chemical nature of magnesium in the body, the potential is low (-2.37V vs SHE (standard hydrogen electrode)). In a liquid environment rich in Cl -, galvanic cells are easily formed between the matrix and the second phase, resulting in galvanic coupling. Corrosion and gas generation at the same time, the chemical reaction formula is as follows:
Mg+2H2O+2Cl- ?MgCl2 +H2 +2OH- With the breakthrough of smelting technology and the improvement of casting process, on the one hand, the purity of magnesium has been greatly improved, on the other hand, zinc, calcium, manganese, aluminum, rare earth and other elements are added The formation of magnesium alloys significantly improves the corrosion resistance and mechanical properties of magnesium and its alloys, so that magnesium and its alloys as biodegradable medical materials have once again attracted attention and become one of the research focuses and hotspots in the field of medical biomaterials at home and abroad.
3.1.1 Compared with traditional titanium alloy, stainless steel and other alloy materials, magnesium alloy has significant advantages
? Corrosion and degradation in the body and full absorption, avoiding secondary operations. Magnesium and magnesium alloy materials have good biocompatibility with the human body, avoiding the pain and wounds of secondary operations. This has a good application prospect for facial plastic surgery. .
? Magnesium is a macro-element in the human body and has good biocompatibility. After being implanted in the human body, magnesium bone nails can undergo dynamic degradation behavior, and its degradation products will not cause allergic reactions in the human body. Magnesium ions are the fourth largest metal in the human body. Elements, adults need to take in 300-400 mg of magnesium every day, and excessive Mg2+ can be excreted through urine. At the same time, magnesium alloy has good cell compatibility, and cells can effectively attach, diffuse and proliferate on the magnesium alloy.
? Good comprehensive mechanical properties, close to human bone tissues. Compared with traditional titanium alloys, cobalt-chromium alloys, stainless steel and other traditional alloy materials, magnesium and magnesium alloy materials have a density and elastic modulus that match human bones. It can largely avoid the stress shielding effect after implantation, that is, when two or more materials with different rigidity bear external force together, the material with higher rigidity will bear higher load, while the material with lower rigidity will bear higher load. The material only needs to bear a low load, causing stress to concentrate on the interface between the bone and the implanted bone nail, thereby reducing the stability of the bone nail and inhibiting the growth of new bone.
? Mg2+ has biological activity and accelerates the rate of bone formation
In bone repair, Mg 2+ stimulates the spinal ganglia to release calcitonin gene-related peptides, induces the production of related proteins, and promotes bone formation. Therefore, magnesium alloys are often used as medical devices for internal fixation of fractures.
? As a common metal, magnesium costs much lower than titanium alloys.
May 26, 2021
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3.1.2 High purity magnesium VS magnesium alloy: single element, stable degradation rate
? Single element, no need to consider the effects of multi-element toxicity. Compared with European rare earth magnesium bone nail products, the degradable magnesium bone internal fixation screw developed by Mei'an is made of 99.999% high-purity magnesium. Due to the single element, it avoids the influence of other elements. The impact is more stable and harmless.
? Stable degradation rate and controllable cavitation generation. Previously, rare-earth magnesium alloy bone nails have reported bone cysts, cavitation caused by excessive degradation, and joint fusion failures caused by cavitation. Compared with magnesium alloys, high purity magnesium (>99.9%) is an effective method to reduce the degradation rate. In 2013, the chief scientist of Eian Technology, Professor Zhao Dewei of Zhongshan Hospital of Dalian University, performed the world's first pure magnesium bone nail for femoral necrosis with vascularized bone flap transplantation. So far, more than 100 cases have been completed, and the treatment effect is very good. The results also show that the high-purity magnesium bone nail has an acceptable degradation rate, which not only meets the fixation requirements at the initial stage of the operation, but also because there is no obvious air pocket formation, it will not affect the fusion of the graft and the tissue. The degradation product magnesium ions will instead promote the surrounding bone The formation of the organization.
Figure 25: The first case of pure magnesium bone nail applied to femoral necrosis with vascularized bone flap transplantation Figure 26: Common joint fractures
3.2 The successful clinical trials of medical magnesium bone nails will open up the tens of billions of medical equipment market
The company's high-purity magnesium bone nails are the first to enter the clinical trial phase: In 2008, Yian Technology, with the joint research and development and help of some university professors, began to develop a magnesium preparation method with a purity of 99.999%. A wholly-owned subsidiary of Yian Technology: Dongguan Mei'an Medical Devices Co., Ltd., which has focused on the development of the medical magnesium industry for many years. At present, the clinical trials of magnesium bone nails by Mei'an Company are mainly used for avascular necrosis of the femoral head and for vascularized bone flaps. The internal fixation of the bone flap during transplantation will continue to expand the indications in the follow-up. In July 2019, the degradable magnesium internal fixation screw developed by Mei'an became the first domestically approved biodegradable biodegradable screw.
May 26, 2021
Figure 24: Magnesium is close to the mechanical properties of human bone tissue
density
Young's modulus
Human bones
1.8-2.1 g/cm3
3-20 GPa
magnesium
1.74-2 g/cm3
41-45 GPa
Titanium alloy, cobalt chromium alloy, stainless steel
>4 g/cm3
>110 GPa
Synthetic hydroxyapatite
>3 g / cm3
>70 GPa
Source: CNKI, "Research Progress in the Improvement of Medical Magnesium Alloys" Guosheng Securities Research Institute
Source: Company's official website, Guosheng Securities Research Institute
Source: National Medical Encyclopedia, Guosheng Securities Research Institute
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Metal screw is also the world's first clinical trial using pure magnesium as an implant in the body. It is currently being implemented smoothly in conjunction with nine hospitals. In May 2020, the company's biodegradable magnesium internal fixation screws obtained the EU CE certification and can be sold to the EU market. In June 2020, the company's wholly-owned subsidiary, Mei'an Medical, sold 100 samples of magnesium internal fixation screws to Georgia International Innovative Medical Services. In addition to the application of high-purity magnesium bone nails, the company is also developing high-value implant products such as bone plates made of high-purity magnesium and high-purity magnesium stents.
Figure 27: 99.999 high purity magnesium bone nail
Trauma medical consumables opened up the blue ocean market for the company: From 2013 to 2018, the sales revenue of China's trauma implant consumables market increased from 3.8 billion yuan to 7.7 billion yuan, and it is expected to reach 14 billion yuan in 2023. The main materials involved at present include stainless steel, metal alloys, medical titanium materials, inorganic non-metallic materials (hydroxyapatite, etc.), polymer materials (polyetheretherketone PEEK) and absorbable materials such as polylactic acid, while medical magnesium The alloy has excellent properties such as close to human bones, degradability, and promotion of bone repair. After successful clinical trials, it is expected to accelerate market penetration.
The aging of the population and consumption upgrade are good for the medical device market: as the age increases, the prevalence of orthopedics will be higher. In 2019, my country's population over 65 years old exceeded 170 million people, accounting for 13%, and the life expectancy of people is getting longer and longer, from 67.8 years in 1982 to 76.3 years in 2015. The penetration rate of joint surgery in my country is extremely low at 0.6%, while that in the United States is 43%. In the future, with the consumption upgrade trend, my country's orthopedic medical equipment is expected to continue to maintain high growth.
Figure 28: Market scale of trauma physiotherapy consumables field (100 million yuan) Figure 29: The proportion of my country's aging population continues to rise (million people)
Source: Company's official website, Guosheng Securities Research Institute
200
180
160
140
120
100
80 60 40 20
Population 65 years and older
Percentage of population aged 65 and over in total population
14% 12% 10% 8% 6% 4% 2%
0 0%
160
140
120
100
80 60 40 20
0
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Trauma implant consumables market
Year-on-year
Source: Wind, Guosheng Securities Research Institute
Source: Southern Institute of Pharmaceutical Economics, Guosheng Securities Research Institute
P.20 Please read the statement on the last page of this report carefully

4. New energy vehicles support the magnesium-aluminum light alloy business sector
The profitability of the magnesium-aluminum alloy business is still under pressure and remains the company's main source of revenue: In 2020, the company's magnesium-aluminum alloy business revenue was 578 million yuan, a year-on-year decrease of 18%; the gross profit margin in 2020 was only 8.0%, which was 18.5% in 2019 dramatically drop. The company's magnesium products business revenue decreased by 20.5% year-on-year, and costs decreased by 11.3% year-on-year; aluminum product revenues decreased by 13.9% year-on-year, and costs decreased by 1.5% year-on-year. It can be seen that as market competition intensifies, the company's magnesium-aluminum alloy products will be under pressure in the future. The company needs to further reduce costs and increase efficiency, and increase the proportion of high-margin products.
4.1 Lightweight vehicles open up the magnesium-aluminum alloy market space, and new energy vehicles are expected to accelerate the lightweight process
Automobile lightweight opens up market space for magnesium-aluminum light alloys. There is still a gap between the amount of aluminum-magnesium used in bicycles in my fcountry and foreign car companies: magnesium alloys, together with aluminum alloys, have become ideal materials for lightweight vehicles due to their light weight, high specific strength and high specific rigidity. Moreover, as the lightest metal structural material, magnesium alloy is more effective than aluminum alloy in reducing weight, and the room for increasing the amount of magnesium used in bicycles is also broader than aluminum. Under the condition of equal bending rigidity, the use of aluminum alloy instead of steel can reduce the dead weight by 61%, and the magnesium alloy can achieve 74%. According to the "Overview of the Situationalization of New Energy Vehicles", for every 10% reduction in the quality of new energy vehicles, the corresponding cruising range can increase by 5%-10%, saving 15%-20% of battery costs and 20% of daily loss costs, and new energy vehicles reduce weight The demands are more urgent than traditional cars.
Figure 30: The amount of magnesium used in domestic bicycles still has a large room for growth Figure 31: Magnesium alloys have the advantages of light weight and high density
Source: Wind, Guosheng Securities Research Institute
May 26, 2021
50% 40% 30% 20% 10%
0%
45%
40%
35%
2015 2020
21% 15%
20%
High-strength steel, low-carbon steel, aluminum alloy, magnesium alloy, composite material
8% 8% 2% 2%
Source: Wind, Guosheng Securities Research Institute
P.21 Please read carefully the statement on the last page of this report

May 26, 2021
Figure 32: The amount of aluminum used in bicycles in my country (kg) is lower than the level of foreign companies Figure 33: The amount of magnesium used in bicycles in my country (kg) is lower than the level of foreign companies
160 140 120 100
80 60 40 20
0
140 110
145
150
China Japan European Union United States
16 14 12 10
8 6 4 2 0
14
3.8 1.5
9.3
China Japan European Union United States
Source: China Nonferrous Metals News, Guosheng Securities Research Institute
Source: China Automotive Materials Network, Guosheng Securities Research Institute
New energy vehicles drive the demand for new magnesium-aluminum alloy materials: How to improve the energy density ratio of power batteries, and realize the lightweight and structural safety of battery boxes, has become the first issue for new energy vehicle manufacturers to consider. The comprehensive cost performance of new materials such as magnesium-aluminum alloy is higher than that of steel, plastics and composite materials, and they are ideal materials for lightweighting new energy vehicles. Tesla Model S uses an all-aluminum body, and the weight is reduced to 2.1 tons. In order to increase the cruising range of new energy vehicles, the proportion of aluminum and magnesium alloy components may be further increased in the future.
According to data from the China Association of Automobile Manufacturers, in 2020, the production and sales of new energy vehicles will be 1.366 million and 1.367 million respectively, a year-on-year increase of 7.5% and 10.9% respectively. In October 2020, the State Council formally issued the "New Energy Vehicle Industry Development Plan (2021-2035)", which made requirements in terms of technology development and innovation, infrastructure construction, and the use of new energy vehicles in the public service sector, and clarified that by 2025, China's new energy vehicle sales accounted for about 25%.
Figure 34: my country's new energy vehicle sales and growth rate (10,000 vehicles)
250
200
150
100
50
0
2016
70% 60% 50% 40% 30% 20% 10% 0% -10%
Year-on-year sales
2017
2018 2019
2020
2021E
Source: Wind, Guosheng Securities Research Institute
The pressure of environmental protection policies has promoted the increasing demand for energy saving and emission reduction of automobiles, and it is imperative to reduce automobile weight. According to the requirements of the "Energy-saving and New Energy Vehicle Technology Roadmap", the quality of vehicle equipment in 2020 will be reduced by 10% compared with 2015, by 20% in 2025, and by 35% in 2030. The main path is to increase the proportion of high-strength steel materials, lightweight materials, and composite materials in the manufacturing of parts and components, as well as the improvement of process technology to achieve lighter body weight, lighter power transmission, and
P.22
Please read the statement on the last page of this report carefully

May 26, 2021
The purpose of lightweight chassis, thereby reducing the weight of the entire vehicle. From 1993 to 2013, the average car weight in Europe, Japan and other countries has been reduced by 25%. It is planned to reduce the average car weight by another 20%-25% in the next 10-15 years. The United States plans to achieve a 25% reduction in vehicle curb weight by 2020 compared to 2010. Many well-known foreign companies have also set lightweight phase goals. For example, Ford's lightweight goal is to use lightweight materials for new cars and trucks by 2020, and reduce the weight of a single vehicle by 110-340Kg.
4.2 Yi'an Yunhai project is completed, "realizing the Yangtze River Delta + Pearl River Delta" layout
The company is one of the earliest companies in the world to deploy large-scale magnesium-aluminum alloy die-casting equipment. There are 4200T and 3500T and other large-scale die-casting equipment. The company is committed to the research and development and production of thin-walled aluminum-magnesium alloys. It has 27-inch large-scale magnesium alloy parts. Mass production of 1.2mm thick and 14-inch notebook computer shells with a wall thickness of 0.45mm has become a leader in the industry. In addition, the company has the ability to analyze the dynamics of die-casting molds, thin-walled parts thermal shaping process and surface high-gloss spraying process, large-scale die-casting parts in-mold injection and other industry-leading processes. Subsidiary Chaohu Yi'an Yunhai has a great advantage in the integration of large-scale parts and components of new energy vehicles. It has been applied to the motors, electronic controls, battery packs, dashboards, doors and other products of new energy vehicles. As a supplier, the company has entered the supply chain of well-known international and domestic customers such as Tesla, CATL, Geely, TKP, HBA, TRW, GKN, JAC, LG, Faurecia, Continental, and Alpine.
Figure 35: The company's magnesium-aluminum alloy equipment
Magnesium aluminum alloy equipment
Production capacity
Magnesium aluminum alloy die casting machine
There are more than 100 magnesium-aluminum alloy die-casting machines, including a large 4200T magnesium-aluminum alloy die-casting machine, and several 650T imported die-casting machines are exclusively used for notebook casings.
CNC (Numerical Control Processing) Machine Imported from Japan
There are more than 300 units, of which more than 100 are dedicated to laptop computers.
Source: Company announcement, Guosheng Securities Research Institute
Figure 36: The company's auto parts products
Source: Company's official website, Guosheng Securities Research Institute
P.23
Please read the statement on the last page of this report carefully

May 26, 2021
In 2015, the company and Yunhai Metals established "Chaohu Yian Yunhai Co., Ltd.". In 2018, the company's fixed increase in the "Yian Yunhai Light Alloy Precision Die Casting Production Base Project" has a total investment of 500 million yuan. At present, the first and second phases of the project have been completed. Completed, it is expected to add new production capacity to the company: about 3.54 million laptop shells, about 7.21 million automotive light alloy die-casting parts, and about 566,000 communication base stations and elevator pedals. The three-year production rate after the completion of the construction is 30%. , 70% and 100%, after fully reaching production, it is estimated that the annual revenue will be 1 billion yuan and the annual net profit will be about 102 million yuan.
Figure 37: Yi'an Yunhai Light Alloy Precision Die Casting Production Base Project Estimated Capacity
Target customer products
Material Weight (kg)
Annual output (pieces)
Laptop computer case
Magnesium alloy 0.15
3535488
Car steering system
Aluminum alloy 0.8
898560
steering system
Aluminum alloy 0.7
197120
Steering bracket
Magnesium alloy 1
1412023
Navigation products
Magnesium alloy 0.45
1098240
Car stereo
Aluminum alloy 0.35
1235520
battery box
Aluminum alloy 26
154440
Car door
Magnesium alloy 4
205920
dash board
Magnesium alloy 4
411840
Communication base station
Aluminum alloy 12
411840
Elevator pedal
Aluminum alloy 16
154440
Source: Company announcement, Guosheng Securities Research Institute
The establishment of a joint venture company with Yunhai Metal in Chaohu and the construction of production capacity this time have a very positive significance for realizing the strategic layout of the Yangtze River Delta, reducing material costs, and expanding and strengthening the 3C and automotive magnesium alloy business.
First, ensure the supply of raw materials and significantly reduce costs. The company is close to the Chaohu Yunhai magnesium alloy production line (with an annual output of 50,000 tons of magnesium alloys). The joint venture with Yunhai Metal can reduce the cost of raw material transportation. It can be directly supplied through molten magnesium water, eliminating the cost of magnesium alloy ingot smelting and the cost of raw materials. Oxidation consumption, finally, can also be recycled through waste magnesium to form a closed loop, further reducing costs. According to the company's preliminary calculation, the cost of magnesium alloy raw materials for the project will be reduced by about 15%-20% compared with the current one, which greatly enhances the cost advantage of the company's products. At the same time, using Yunhai Metal's existing construction land in Chaohu, the project was implemented very quickly.
Second, occupy the golden area of ??the light alloy die-casting market in the Yangtze River Delta and realize the strategic layout of "Pearl River Delta + Yangtze River Delta" dual centers. Since the establishment of the company, the place of operation has been in the Pearl River Delta region. The Yangtze River Delta region is one of the largest automobile production bases in my country. There are well-known automobile manufacturers such as SAIC, Shanghai Volkswagen, Shanghai GM, etc., and the country's most comprehensive and largest auto parts industry cluster; in Anhui Province , There are automobile manufacturers such as Chery Automobile, Jianghuai Automobile and Hefei Changan. In the field of notebook computers, this project can radiate Hefei LCFC (Lianbao, a joint venture between Lenovo Group and Taiwan Compal Group), Suzhou Pegatron (Heshuo), Shanghai HP (HP), Kunshan Wistron (Wistron), Kunshan Compal, etc. The main notebook computer assembly factory.
5. Profit forecast and investment advice
P.24
Please read the statement on the last page of this report carefully

5.1 Earnings forecast assumptions
Operating income
The core of the company's current revenue comes from the sales of core aluminum and magnesium products. As the company's current core business, it is expected to open up a broader market space for the company after its applications in the fields of medicine and automobiles are gradually promoted. At the same time, taking into account the company's own competitive advantages in segmented areas, we reasonably expect the company's operating income from 2021 to 2023 to be 11.88, 15.24, and 1.905 billion yuan, corresponding to growth rates of 25.6%, 28.3%, and 25.0%, respectively.
Gross margin
The gross profit margin of the company's magnesium-aluminum alloy products is affected by the fluctuation of the corresponding metal prices, and the gross profit margin is subject to certain volatility. We reasonably assume that the subsequent gross profit margin of the company's main operations will stabilize, and the high gross profit portion from liquid metal sales is expected to gradually increase the company's overall gross profit margin. We expect the company's gross profit margin to achieve 21.48%, 21.89%, and 22.02% in 2021-2023, respectively.
Period expense ratio Sales expense ratio: The company's sales expense ratio is expected to drop significantly in the future. The core reason is that the company's current main business has successfully docked with the core customer groups in the industry, and it is expected to form a long-term binding relationship with customers in the future, and sales expenses will reduce the erosion of profits. Management expense ratio: The company's daily expenses are mainly concentrated in management expenses. As the company's current business segments are still in a period of heavy performance, the core management team still needs to be filled as the business gradually expands. We expect the company's management expenses and revenue scale to grow at the same rate. R&D expense ratio: The company's R&D expense is mainly connected to the current core business segments. Considering that the company has formed a leading position in the subdivision field and possesses R&D advantages, and its products have been recognized by core customers at home and abroad, the subsequent R&D expense rate is expected to remain stable.
May 26, 2021
Figure 38: Forecast of company profit and main cost subjects (100 million yuan)
years
2019 2020 2021E
2022E 2023E
Magnesium products
Operating income
4.05 3.22
4.01
5.05 6.36
YOY%
25.60% -20.49% 24.60%
26.00% 26.00%
Operating cost
3.33 2.96 3.67
4.59 5.76
Gross profit
0.71 0.26 0.34
0.46 0.61
Gross profit margin (%)
17.58% 8.01% 8.45%
9.18% 9.54%
Aluminum products
Operating income
2.97 2.56
3.15
3.90 4.99
YOY%
-9.41% -13.87% 23%
24% 28%
Operating cost
2.39 2.36 2.97
3.62 4.60
Gross profit
0.58 0.20 0.18
0.28 0.39
Gross profit margin (%)
19.46% 7.85% 5.60%
7.13% 7.85%
Liquid metal
Operating income
0.73 1.23
1.50
2.20 3.10
YOY%
7.95% 68.49% 22.27%
46.67% 40.91%
Operating cost
0.66 0.5706 0.90
1.58 1.72
Gross profit
0.06 0.66 0.60
0.62 1.38
Gross profit margin (%)
8.68% 53.49% 40.00%
28.00% 44.60%
profit prediction
Operating income
10.25 9.45 11.88
15.24 19.05
YoY%
3.98% -7.77% 25.63%
28.31% 25.00%
Gross profit margin (%)
21.08% 20.85% 21.48%
21.89% 22.02%
P.25
Please read the statement on the last page of this report carefully

5.2 ????
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May 26, 2021
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??? YoY(%)
90.20% -84.27% 151.49%
34.22% 35.38%
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share price
EPS PE
20210524
2021E 2022E 2023E 2021E
2022E 2023E
300034.SZ ???? 25.43
0.57 0.76 0.98 44.61
33.46 25.95
002540.SZ ???? 4.88
0.33 0.38 - 14.79
12.84 -
300115.SZ ???? 19.36
1.00 1.46 1.91 19.36
13.26 10.14
600456.SH ???? 40.20
1.08 1.37 1.74 37.22
29.34 23.10
average value
29.00
22.23 19.73
300328.SZ ???? 6.34
0.06 0.08 0.11 107.36
79.99 59.08
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risk warning
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P.26
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May 26, 2021
Disclaimer
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P.27
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- [ ]


He gave his father “the talk”
His passport requires no photograph
When he drives a car off the lot, its price increases in value
Once a rattlesnake bit him, after 5 days of excruciating pain, the snake finally died
His 5 de Mayo party starts on the
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