The magnetics+testing business is gaining strength in both directions, with impressive results in the first three quarters. In the first three quarters of 2022, the company achieved revenue of 2,081 million yuan, an increase of 14.30% over the previous year; net profit attributable to the parent company was 280 million yuan, an increase of 81.38% over the previous year. After deducting non-net profit of 233 million yuan, a year-on-year increase of 109.25%. Among them, the third quarter achieved operating income of 654 million yuan, a year-on-year decrease of -3.65%; Guimu's net profit was 81,91117 million yuan, an increase of 64.47% over the previous year. After deducting non-net profit of 69.1332 million yuan, a year-on-year increase of 62.12%.
The testing business is growing rapidly, and the company is seizing opportunities for industry development. Benefiting from the continuous expansion of industrial science and technology segments, the continuous improvement of people's living standards and the increasing attention paid by all sectors of society to environmental protection and quality and safety, the domestic third-party testing business maintained rapid growth. The market size exceeded 400 billion yuan in 2021, with a growth rate of over 12%. It is expected that the high growth rate will continue in the next 3-5 years. The company is the only fully licensed infrastructure inspection agency in China. In 2021, it acquired Jilin Zhengda to enter the road inspection field, continued to expand the scope of inspection business, and built a nationwide inspection service network to actively explore incremental markets such as the environment, EMC, and electronics. Seizing industry development opportunities, the company broadened its scope of business through acquisitions and the establishment of a nationwide testing network to help the company's performance grow.
The demand space for magnetic materials is broad, and the company's production capacity is expanding in an orderly manner. The company also lays out a variety of magnetic materials, and currently has a production capacity of 50,000 tons of electronic-grade manganese tetroxide, ranking first in the country. Additionally, it has a production capacity of 5,000 tons of battery-grade manganese tetroxide, 20,000 tons of permanent magnet ferrite devices, 5,000 tons of soft magnetic components, and 2,000 tons of rare earth permanent magnet components. In a dual-carbon context, industries such as new energy vehicles, wind power, and energy-saving motors are expected to maintain a high level of prosperity in the next 3-5 years, which in turn will drive rapid growth in demand for magnetic materials. In order to meet the growing demand in the downstream market, the company is expanding production capacity in an orderly manner, with an annual production capacity of 10,000 tons of battery-grade manganese tetroxide, 4,000 tons of metallic magnetic powder, and 4,000 tons of metal soft magnetic powder.
Investment advice: The company has been deeply involved in the magnetic materials business for many years, and has also deployed soft magnets, ferrite permanent magnets and rare earth permanent magnets, and is the absolute leader in manganese tetroxide. In the field of testing, the company is the only fully licensed infrastructure testing agency with a national layout in China. The domestic testing business is in a stage of rapid development, and performance is expected to continue to grow rapidly as the scope of testing and fields are broadened. The company's revenue is expected to reach 32.16, 40.55, and 5.321 billion yuan in 2022-2024, net profit of the mother will reach 352, 476 and 631 million yuan respectively, and EPS will be 0.47, 0.64 and 0.85 billion respectively. Maintain a “buy” rating.
Risk warning: magnetic production capacity falls short of expectations; downstream demand is weak; raw material prices are rising; testing business growth falls short of expectations
