ToLand(300855) 华泰证券·2025-01-07 07:50Investment Rating - The report initiates coverage on Tunan Co., Ltd. with a "Buy" rating and sets a target price of 27.75 RMB [1][9]. Core Views - Tunan Co., Ltd. is positioned to benefit from the scarcity of precision castings and has capabilities in both casting and deformation high-temperature alloy smelting, which is expected to unlock new growth opportunities [1]. - The company’s large complex thin-walled structural components are anticipated to solidify its performance foundation, while its machining business is likely to benefit from an increase in the outsourcing ratio within the industry chain, driving long-term performance growth [1]. - The high-temperature alloy industry is projected to maintain a high level of prosperity in the medium to long term, driven by new model iterations and the aftermarket for aerospace engine maintenance [2]. Summary by Sections Company Overview - Tunan Co., Ltd. is one of the few domestic companies capable of mass-producing both deformation and casting high-temperature alloys. From 2018 to 2023, the company achieved a compound annual growth rate (CAGR) of 38.87% in casting high-temperature alloy revenue and 19.69% in deformation high-temperature alloy revenue, demonstrating significant growth [3]. Industry Dynamics - The high-temperature alloy materials account for 40% to 60% of the total weight of modern aerospace engines. The market for military aerospace high-temperature alloys in China is expected to reach an average annual market size of 21.32 billion RMB from 2021 to 2030, with a CAGR of 29.45% from 2022 to 2030 [2]. Business Expansion - The company has expanded its product categories and established a deep presence in the Shenyang region, with projects aimed at producing 500,000 precision components annually and 10 million small aerospace components [4]. Market Positioning - The report highlights that concerns regarding price reductions in aerospace products impacting Tunan's profitability are unfounded. The company’s leading position in the high-temperature alloy industry, particularly in precision castings, ensures that price reductions are manageable and that long-term profitability will remain robust due to scale effects and an increasing proportion of precision casting sales [5]. Financial Projections - The company is expected to achieve net profits of 333.49 million RMB, 439.40 million RMB, and 540.01 million RMB for the years 2024 to 2026, respectively, with a CAGR of 17.80% from 2024 to 2026. The target price is based on a 25X price-to-earnings (PE) ratio for 2025 [6].