The company is a domestic rare earth permanent magnet pioneer and leading enterprise, the profits in the past two years are not good, forming a certain pressure on the market capitalization. With the release of production capacity, the improvement of product structure and the steady improvement of profitability, it is expected to usher in a return to valuation.
Zhongke Sanhuan is the first listed company in China's rare earth permanent magnet industry. The company, which belongs to the Chinese Academy of Sciences, was established in 1999 and listed on the Shenzhen Stock Exchange in 2000. it is the builder of China's first NdFeB industrial production line and the first magnetic material enterprise to obtain NdFeB patent license. it is also the first Chinese company to export NdFeB to overseas markets.
The company is the largest high-performance NdFeB permanent magnet material enterprise in China, with a production capacity of 20,000 tons of sintered NdFeB and 1500 tons of bonded NdFeB in 2021. The company plans to expand the production capacity of sintered NdFeB to 30,000 tons in 2022, and has the ability to expand production by about 21000 tons around the end of 2024.
Technology is the most prominent feature of the company. The company's research and development direction is both forward-looking and commercial practicality. The company is the first to enter the international NdFeB high-end application field-VCM domestic rare earth permanent magnet enterprises, breaking the long-term monopoly of the United States, Europe, Japan and other enterprises in this field. At present, the company has been able to provide the market with sintered NdFeB products with high comprehensive properties (the sum of maximum magnetic energy product (unit MGOe) and intrinsic coercivity (unit kOe) > 75) and high temperature stability (operating temperature > 200℃). Since 2013, the company has been researching and developing sintered NdFeB magnets with high abundance of rare earth elements (cerium and lanthanum). The company has developed a series of high-abundance rare earth magnets, including high-performance products with a maximum cerium content of more than 40% of the total rare earths, high-performance products with a maximum magnetic energy product of more than 50 trillion, and high coercivity products produced by grain boundary diffusion technology.
New energy vehicle → industrial motor → humanoid robot, high-performance NdFeB magnetic material consumption growth rate is constantly being raised.
The application penetration and demand of new energy vehicles, wind power, frequency conversion air conditioners, energy-saving elevators and other fields are increasing. The energy revolution will increase the total global demand for high-performance NdFeB permanent magnet materials from 74000 tons in 2020 to 226000 tons in 2025, with a compound annual growth rate of 25%. It is estimated that the demand for high-performance NdFeB for 10 million humanoid robots will reach 20-40,000 tons, equivalent to 20-40% of the total global demand for high-performance NdFeB in 2021. Intelligence is expected to bring a new height of development of high-performance NdFeB.
Give a "highly recommended" investment rating. It is estimated that the company's 2022-24 net profit will be 1.31 billion yuan, corresponding to the price-earnings ratio of 21-18-15. In 2019 and before, the company, as the largest NdFeB enterprise in China, basically maintained the first profit in the industry. It is expected that with the expansion of production capacity and the optimization of product structure, the company's profitability will be significantly improved. It is expected that the company will put into production 10,000 tons of new capacity this year, and will be able to expand production by about 21000 tons around the end of 2024. if all are put into production, the company will stabilize the leading capacity of NdFeB in the world. From the perspective of PS and unit market value corresponding to production capacity or unit market value corresponding to production, the company valuation needs to be improved. Coverage for the first time, giving a "highly recommended" investment rating.
Risk hints: downstream market demand significantly lower than expected risk, raw material supply and price fluctuation risk, increased market competition risk, exchange rate fluctuation risk, new expansion less than expected risk, secondary market and lithium electricity plate overall stock price plummeting risk and so on.