Event: recently, the company released its semi-annual report for 2020.
Main points of investment:
The company's second-quarter results slightly exceeded expectations. In the first half of 2020, the company achieved operating income of 288 million yuan, down 2.23% from the same period last year; operating profit was 90 million yuan, up 4.05% over the same period last year; net profit was 75.72 million yuan, up 5.09% over the same period last year; net profit after deducting 75.14 million yuan, up 3.17% over the same period last year; net cash flow from operating activities was 73.21 million yuan, up 43.07% from the same period last year, and basic earnings per share was 0.23 yuan. Of this total, revenue in the second quarter was 151 million yuan, up 5.21% from the same period last year; net profit was 40.89 million yuan, up 17.16% from the same period last year, and the performance in the second quarter slightly exceeded expectations. At present, the company's main products are bonded and hot-pressed NdFeB magnets, and samarium cobalt magnets.
The decline in demand for automotive magnets leads to negative revenue growth of bonded NdFeB. The company's bonded NdFeB magnet is the company's dominant product; 19 years revenue of 570 million yuan, an increase of 2.50% over the same period last year, accounting for 94.49% of the company's revenue. In the first half of 20 years, the company's revenue of bonded NdFeB magnets was 269 million yuan, down 3.13% from the same period last year, and revenue accounted for 93.48%. The negative revenue growth was mainly due to the short-term outage and downstream demand of the company, which led to a decline in sales of automotive magnets. Specifically, in terms of the company's product segment, due to technological progress, the downstream demand for magnets for optical discs and hard disks will continue to decline; while the demand for magnets for automobiles and energy-efficient motors is expected to increase steadily, at the same time, affected by policy support and other factors, China's automobile sales have recently become regular, and overall it is expected that the demand for automotive magnets will resume growth in the second half of the year. The company's second quarter orders show that the total amount of new orders is 171 million yuan, including 156 million yuan of bonded NdFeB and 12.55 million yuan of hot-pressed NdFeB; the total completed amount of the order is 121 million yuan, with a completion ratio of 70.76%. The company's performance improved significantly in the second quarter, combined with the improvement of downstream demand and the company's industry position, the company is expected to resume revenue growth in the second half of the year.
The company's profitability has improved, and it is expected to improve in 20 years. In the first half of 2020, the company's sales gross margin was 37.30%, up 2.76% from the same period last year, of which 39.72% in the second quarter was 39.72%, up 5.07% from 34.65% in the first quarter, mainly due to product structure optimization. Specific to the subdivision of products: bonded NdFeB is 37.30%, an increase of 2.76 percentage points over the same period last year. The company pays attention to R & D investment and technological innovation for a long time, and has independently implemented 22 R & D projects in 19 years, and some products have been put into mass production, and the added value of new products is relatively high. With the warming of industry policies, judging by future price trends, and the company's long-term continuous development of new products, it is expected that the company's profitability will improve in 20 years.
Maintain the company's "overweight" investment rating. It is predicted that the earnings per share of the company from 2020 to 2021 will be 0.50yuan and 0.59yuan respectively. According to the closing price of 19.18yuan on September 1st, the corresponding PE is 38.7times and 32.6times respectively. At present, the valuation is reasonable relative to the level of the industry, and the "overweight" investment rating is maintained.
Risk hints: upstream raw material prices fluctuate sharply; economic downturn exceeds expectations; industry competition intensifies