Copper processing products have a full range of products, and the "14th five-year Plan" accelerated expansion to seize market share. The company is the largest copper processing enterprise in China, with many product categories, and the scale of each category can achieve the forefront of sub-industry.
The company's products are aimed at the category with the greatest market demand, with a low gross profit margin but fast turnover and stable profitability. The output of copper products of the company from 2017 to 2021 has an average annual compound growth rate of 18.3%. It has accelerated its expansion since its listing and has a domestic market share of 8% in 2021. The third round of capacity expansion will be launched with the help of convertible bond projects.
The production capacity of 60,000 tons of electromagnetic flat line is planned, and the high voltage flat line leads the industry. Flat wire drive motor of new energy vehicle has become a trend to replace circular wire motor because of its higher slot full rate, higher power density, stronger heat dissipation capacity and insulation resistance. high voltage drive motor is expected to use flat wire. The company is the top three domestic manufacturers of electromagnetic wires, and has become an important supplier of domestic electromagnetic wires by virtue of its technical advantages in the field of flat wires. It will have a production capacity of 20,000 tons by the end of 2022, and another 40,000 tons will be built soon. The company leads the industry in 800V high-voltage flat line technology, and the number of projects is absolutely dominant.
Scrap copper import leader, low-carbon demand opens the market space for recycled copper. 2021 the company procures 400000 tons of recycled copper raw materials, accounting for 3% of the company's copper raw materials, and 10% of the domestic output of recycled copper, which is in the forefront of the country. It is the first batch of demonstration enterprises of "urban mines" in the country, and the company has led the industry in the import of waste copper over the years. Carbon emission of recycled copper is only 1x3 of primary copper, more and more automotive and consumer electronics customers have begun to certify the carbon footprint of copper raw materials, the company has passed SCS Kingfisher recycled component certification, and has formed joint research and development with a number of world-class customers, establishing a first-mover advantage in the low-carbon recycled copper market.
Greatly expand the production capacity of rare earth permanent magnet materials. The company has been engaged in the production and sales of NdFeB permanent magnet materials for more than 20 years, and has a production capacity of 5000 tons of sintered NdFeB permanent magnet materials, the scale is according to the top ten in China, and its profitability is the same as that of the industry head company. In order to meet the explosive demand for rare earth permanent magnet materials in the fields of new energy, energy saving and environmental protection, the company has built 8000 tons of new production capacity in Baotou and is expected to put into production of 4000 tons by the end of 2023 and 2024 respectively. After reaching production, the company will have a blank production capacity of 13000 tons of NdFeB permanent magnet materials.
Profit forecast and valuation: the company's two major businesses of copper processing and rare earth permanent magnet are in a period of rapid expansion, the products continue to upgrade, and have the advantage of recycling recycled copper, fully benefiting from the incremental demand for copper and rare earth permanent magnet materials in the new energy market. It is estimated that the homing net profit of 2022Universe 2023Universe in 2024 is RMB 1.07 billion and EPS is 0.41 billion and 0.92 respectively. Through multi-angle valuation, we believe that the value of the company's stock is between 8.0 and 9.3 yuan, with a premium of 14% to 32% over the company's current share price, covering the "overweight" rating for the first time.
Risk hints: incremental market demand such as new energy vehicles is less than expected risk; copper or rare earth raw material prices fluctuate sharply; market competition leads to product gross profit margin decline risk; the construction progress of new projects is slow.