The annual performance has increased rapidly, which is in line with expectations. The company issues the 2022 annual performance forecast. During the reporting period, the company realized a net profit of 3.6-400 million yuan (yoy+66.9-85.5%) and deducted a non-net profit of 3.0-340 million yuan (yoy+75.6%-98.7%). Q4 realized net profit of 0.8-120 million yuan (yoy+33.3%-100.0%) and deducted non-net profit of 0.7-110 million yuan (yoy+14.5%-79.0%) in a single quarter. The main reasons for the substantial increase in the company's parent net profit are as follows: 1) the testing business continues to increase, and the performance improves significantly; 2) the magnetic material business advances steadily, especially the profitability of Si Manganese is greatly improved; 3) the shareholding company brings higher investment income. The company's annual performance increased rapidly in 2022, in line with expectations.
Baowu enters the master and pays attention to catalysis. On December 21, 2022, China Baowu Iron and Steel Group and Sinosteel were reorganized. Sinosteel as a whole was formally incorporated into Baowu. Baowu indirectly controlled the company through 32.9% of the holding company of Sinosteel. Baowu is the world's largest iron and steel enterprise, and the company is expected to deeply integrate into Baowu's "one-base and five-yuan" business plan, share excellent operating mechanisms, management means, scientific and technological achievements and funds, and benefit from the background of major shareholders to obtain upstream resource endowments. Become a first-line supplier of magnetic materials.
Deep ploughing and testing for more than 30 years to seek all-round development. Zhengzhou Metal products Research Institute under the company is a third-party inspection organization approved by AQSIQ. It has a history of more than 30 years and is fully qualified to cultivate the field of railway engineering. 2017-2021 revenue CAGR36.2%, gross profit margin 2022H1 as high as 56.3%.
With the national layout of the company's business, the market share of railway testing is expected to continue to increase; at the same time, the company will actively expand non-iron business in roads, bridges and other infrastructure areas through mergers and acquisitions, which is expected to continue to create business growth points.
Four manganese production and marketing are prosperous, expand production and seize the market. 1) device end capacity expansion: the company now has 20000 tons of permanent magnetic devices, 5.0kt soft magnetic devices, 2.0kt rare earth permanent magnets, 3.0kt metal soft magnetic powder (to be expanded to 7kt), 1.0kt metal magnetic core production capacity (to be expanded to 5kt).
2) grab the market at the end of raw materials: there are 50, 000 tons of electronic grade and 5, 000 tons of battery-grade manganese tetroxide production capacity.
Based on the prediction of the future demand growth of high-performance lithium manganate market and potential lithium ferromanganese phosphate market, it is planned to add 10,000 tons of battery-grade tetramanganese, and the capacity is expected to be released at the beginning of 2023. Benefiting from the decline of electrolytic manganese raw materials in 2022 and the surge in demand for four manganese orders, we believe that the company is expected to quickly increase profits through production expansion.
Profit forecast: the net profit from 2022 to 2024 is estimated to be 3.9000,000 yuan, the corresponding EPS is 0.51, 0.73, and the corresponding PE is 22.6, 15.8 and 12.0x, respectively. The company testing business incentive system is good, magnetic materials business to enjoy the growth of the industry, the future is expected to maintain high revenue, profit growth, maintain the "buy" rating.
Risk tips: magnetic materials downstream demand growth is lower than expected, testing business expansion is not as expected, raw material price fluctuation risk and so on.