The net profit of homing in 2022 is high, which is in line with expectations. The company announced KuaiBao's 2022 results, with annual revenue of 2.76 billion yuan, yoy+5.7%; 's total profit of 430 million yuan, yoy+60.5%; 's net profit of 370 million yuan, and yoy+73.2%; 's non-return net profit of 320 million yuan, yoy+85.7%. The main reasons for the substantial increase in performance are as follows: (1) the inspection and testing business has developed well; (2) the overall performance of the magnetic materials industry has improved, especially the profit level of manganese tetroxide products has increased significantly; (3) the operating performance of the participating companies has increased rapidly compared with the same period last year, so the company's investment income has increased significantly compared with the same period last year.

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 largest iron and steel enterprise in the world. as the high-quality testing and magnetic materials business platform of Baowu Group, the company is expected to be deeply integrated into Baowu's "one-base and five-yuan" business planning, sharing excellent operating mechanisms, management means, scientific and technological achievements and capitals. and benefit from the background of major shareholders to obtain the upstream resource endowment, become a first-line magnetic material supplier, the internal integration process is worth looking forward to.

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: it is estimated that the net profit from 2022 to 2024 will be RMB 37,000,000, corresponding to EPS 0.490.67max 0.86 yuan per share, and corresponding PE to 22.5pm 16.5pm 12.9x. 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.