Incident: On March 30, the company released its annual report. In 2022, the company achieved annual revenue of 9.72 billion yuan, an increase of 36% over the previous year; net profit of the mother was 850 million yuan, an increase of 113% over the previous year; net profit of the non-return mother was 780 million yuan, an increase of 107% over the previous year. The fourth quarter achieved operating income of 2.21 billion yuan, a decrease of 1.2%/2.1% over the same period; net profit returned to the mother was 230 million yuan, an increase of 20%/10% over the same period; net profit after deducting net profit of the non-return mother was 170 million yuan, a decrease of 12%/20% over the same period.
Production and sales levels remained stable in the fourth quarter, and the recovery in rare earth prices in the fourth quarter supported performance growth. 1) Volume: By the end of 2022, the company's rough production capacity was 22,000 tons. According to the 80% capacity utilization rate, it is expected to achieve rough production of 0.4,400 tons in the fourth quarter. The yield is assumed to be 65%. The corresponding finished product output is about 30,000 tons. Quarterly production increased slightly from month to month. 2) Price: In the fourth quarter of 2022, the price of praseodymium oxide ended its downward trend and gradually stabilized due to increased downstream centralized replenishment and increased demand for stocking. The average quarterly price of praseodymium oxide in the fourth quarter of 2022 was about 680,000 yuan/ton, down 8% from the previous quarter.
The gross margin level increased steadily throughout the year, and leading high-quality cost management capabilities empowered efficiency. The company's gross profit margin for the full year of 2022 was 18.3%, up 2.2 pct from 2021, net sales margin was 10.4%, up 3.7 pct from '21; looking at a single quarter, Q4 gross profit margin was 19.3%, up 1.3 pct over the previous quarter; net sales margin was 12.1%, up 2.7 pct from month to month. High-quality cost management capabilities empowered efficiency. The gross margin level increased steadily throughout the year, compounded by scale effects and exchange rate changes. Expenses remained within a reasonable range during the period, and the cost rate for the period decreased by 3 pct.
Investment and construction capacity matches the gradual release of order demand, and the company's performance is expected to grow with high quality. The company plans to produce 10,000 tons of sintered NdFeB. As of March 29, 2023, a new production capacity of 50,000 tons has been invested, and the current rough production capacity is 25,000 tons. Production may be expanded by another 21,000 tons by 2024, or in line with market demand, with a total production capacity of 510,000 tons. The company's leading customers have a high-quality supply chain that matches demand and rationally releases production capacity, and performance is expected to maintain high-quality growth.
Investment advice: Despite short-term demand shocks, the company continues to cultivate high-performance NdFeB magnets and is expected to maintain high-quality development. The company's revenue from 2023 to 2025 is estimated to be 110.5/129.4/14.35 billion yuan respectively, achieving net profit of 9.3/11.2/1.25 billion yuan, EPS of 0.76/0.92/1.03 yuan/share, and corresponding PE of 17.4/14.4/12.9 times respectively, maintaining the company's “buy” rating.
Risk warning: risk of price increases for rare earth raw materials; risk of downstream demand falling short of expectations; risk of major changes in technology routes; risk of production capacity falling short of expectations.