occurrences
On October 27, the company released its report for the third quarter of 2022. The company's net profit for Q1-Q3 2022 increased 81.4% year-on-year.
reviews
Net profit for Q1-Q3 2022 was +81% year on year. The company achieved operating income of about 2,081 million yuan in Q1-Q3 2022, +14.30% year on year; realized net profit of 280 million yuan to the mother, +81.38% year on year. The company achieved operating revenue of about 654 million yuan in Q3 2022, -3.65% year-on-year, -11.14% month-on-month, and achieved net profit of 82 million yuan to the mother, +64.47% year-on-year and -39.81% month-on-month.
The main reason for the increase in the company's net profit for Q1-Q3 2022 was the good development of the company's testing business and magnetic materials business.
Production capacity expansion plans continue to advance, and production is expected to continue to rise. In terms of manganese tetroxide, the company is actively promoting the expansion of production capacity. It is expected to add 10,000 tons of battery-grade manganese dioxide production capacity, and plans to release production capacity in early 2023. In terms of metallic magnetic powder cores, the company plans to renovate and expand the metal magnetic powder core production line, add 4,000 tons of annual production capacity, and build a 4,000 ton soft metal powder production line to support this production line. After the production line is completed, the company's annual production capacity of metallic magnetic powder cores can reach 5,000 tons, and the annual production capacity of aerosolized metal soft magnetic powder can reach 7,000 tons.
The magnetic materials and testing industry is growing rapidly, and downstream demand is improving. The company's main business includes magnetic materials and inspection and testing services. Among them, rare earth permanent magnet materials are widely used in the field of new energy vehicles, and downstream demand is improving. According to Report Linker's estimates, China's magnetic materials industry has space of about 102.7 billion yuan in 2020, is expected to reach 235.7 billion yuan in 2027, and CAGR will reach 12.6% in 7 years. In terms of testing business, as of September 2022, the cumulative amount of completed infrastructure construction investment in China grew 11.2% year-on-year, an increase of 0.83 pct over the previous month. Since 2022, the year-on-year growth rate of China's infrastructure construction investment has remained above 8%, and high downstream growth may drive related testing demand.
Investment advice
With the sharp rise in product volume and price, the company's future performance will continue to increase. We expect the company's net profit to be $359/452/617 million for 2022/2023/2024, respectively, and the corresponding EPS of $0.47/0.60/0.81, respectively. Based on the closing price of 10.51 yuan on October 27, 2022, the corresponding PE was 22.20/17.66/12.92 times, respectively. Combined with the boom in the industry, we are optimistic about the company's development and maintain the “Highly Recommended” rating.
Risk warning
Environmental policies tightened; downstream demand in the testing industry fell short of expectations; downstream demand for NdFeB fell short of expectations