Events:
The company released its annual report in 2019. During the reporting period, the company achieved a total operating income of 603 million yuan, an increase of 0.62% over the same period last year; a net profit of 147 million yuan, down 5.71% from the same period last year; a corresponding EPS of 0.46 yuan per share, unchanged from the same period last year; and a net profit of 145 million yuan after deduction, down 7.04% from the same period last year.
Main points of investment:
Sales of magnets for cars and energy-saving motors increased, while demand for magnets for hard drives decreased: 2019 bonded NdFeB magnets earned 570 million yuan, up 2.5 percent from the same period last year, with a gross profit margin of 34.20 percent, down 1.61 percent from the same period last year. The sales income of the company's automotive magnets and some high-efficiency and energy-saving motor magnets has increased, and its added value is greater than that of hard disk magnets, hot-pressed magnets and samarium cobalt magnets. The company continues to adjust the product structure according to the changes in market demand, vigorously develop new products with great market growth potential, and speed up the process of new product research and development.
The performance of hot-pressed NdFeB magnets and samarium cobalt magnets was not as good as expected: in 2019, the revenue of hot-pressed NdFeB magnets and samarium cobalt magnets was 17.7727 million yuan and 15.4226 million yuan respectively, down 27.53% and 18.08% from the same period last year. Among them, the gross profit margin of samarium cobalt magnets also declined, from 58.80% in 2018 to 38.91%, down 38.93% from the same period last year. Both results fell short of expectations, dragging down earnings.
The construction of new projects to increase capital and expand production is expected to become a new profit growth point: in 2019, the company will actively promote the construction of Chengdu Silver Magnetic, a wholly-owned subsidiary. By the end of the reporting period, the main part of the infrastructure construction of Chengdu Silver Magnetic Materials Co., Ltd. has been completed and is expected to be put into use by the end of 2020. The samarium cobalt magnet project and the hot-pressed NdFeB magnet project invested by the company with super-raised funds have been completed. at present, the two projects are facing difficulties in technology, process, equipment automation transformation and market development, if we break through the technical bottleneck, it will help to expand the variety and application fields of the company's products, and further enhance the company's competitiveness and influence in the industry.
Profit forecast and investment suggestion: considering the relative stability of the company's overall production, it is estimated that the company's return net profit in 20-22 years is 154 million yuan, 168 million yuan and 180 million yuan respectively, EPS is 0.48,0.52 and 0.56 yuan per share respectively, and the PE corresponding to the recent closing price of 14.81 yuan is 31.16,28.53 and 26.59 times respectively.
Risk factors: sharp fluctuations in rare earth prices and higher-than-expected spread of the epidemic led to weak demand downstream.