The company released its 2022 annual report:
In 2022, the company's revenue was 6.41 billion yuan, +70.74% year on year; net profit of the mother was 356 million yuan, or -31.4% year on year; net profit of the non-return mother was 382 million yuan, +7.3% year on year. Among them, 22Q4 revenue was 1.41 billion yuan, +21.8% year on year, -21.6% month on month; net profit of returned mother was 24 million yuan, -83.1% year on year, -73.3% month on month; net profit after deducting non-return mother's net profit was 11 million yuan, -87.1% year on year and -88.9% month on month.
The share of new energy vehicles in downstream applications continues to rise: the NdFeB business revenue in 2022 was 5.425 billion yuan, of which revenue from new energy vehicles, consumer electronics, industry and other sectors was 14.73, 17.84, and 2,167 billion yuan in that order, up 242%, 27%, and 42% year-on-year, accounting for 27.2%, 32.9%, and 39.9% in that order. Among them, in terms of new energy vehicles, according to the company's announcement, the domestic market share of the company's products reached 24.3%, and they are also the main supplier of BYD.
Production and sales were basically in line with expectations. Fluctuations in rare earth prices during the year may affect net profit per ton: in '22, the company's production and sales of finished NdFeB products were 10138 and 9614 tons in that order, up 24.4% and 24.1% year-on-year. The current inventory of finished products was 1,312 tons, +66.5% over the same period last year. The company has a certain inventory of rare earth raw materials. When rare earth prices fluctuate in the second half of the year, the company's quarterly profit declined.
The company's magnetic material production capacity continues to be released: According to the announcement, by the end of '22, the company's NdFeB blank production capacity was 21,000 tons, and production is expected to expand to 36,000 tons by mid-25. At the same time, the company's current crystal boundary penetration capacity of 10,000 tons may provide effective support for new energy vehicles and other application areas.
Actively laying out the resource side, cost advantages may gradually become apparent: the company signed an “Investment Cooperation Agreement” with China Mining Resources, jointly set up a joint venture to explore, develop, and invest in rare earth mines in Africa, and has obtained prospecting rights for the Nkombwa (Nkombwa) rare earth mine in Zambia. The total amount of rare earth oxide ore resources detected in the rare earth mineral rights zone was 2.78 million tons, the average grade of TREO was 2.76%, the total amount of associated apatite-type phosphate ore resources detected was 21.82 million tons, and the average grade of P2O5 was 7.06%. When it comes to recycling waste, the company has established long-term and stable partnerships with suppliers.
Investment advice:
We expect the company to achieve operating income of 77.96, 95.18, and 11.646 billion yuan respectively in 2023-2025, and net profit of 55,663 million yuan, and 860 million yuan, corresponding to EPS of 0.49, 0.6, and 0.77 yuan/share, respectively. The current stock price corresponding to PE is 17.9, 14.8, and 11.4 times. Maintaining the “Increase in Holding-A” rating, the target price for 6 months was adjusted to 11.04 yuan/share.
Risk warning: Prices of rare earth raw materials fluctuated greatly, demand fell short of expectations, and project progress fell short of expectations.