Sinosteel Tianyuan: magnetic material + testing business two giants. The company is located in Maanshan, Anhui Province and is actually controlled by the State-owned assets Supervision and Administration Commission of the State Council. The main products and services include magnetic materials and inspection services. The company was selected into the State-owned assets Reform "Science Reform demonstration Action" in 2020, and the first restricted stock incentive plan was implemented in September 2021.
Magnetic material business: manganese tetroxide benefits from rising prices, soft magnetic, permanent magnet multi-point blossom. Magnetic materials can be simply divided into soft magnetic materials and permanent magnetic materials; as electrified substrates, magnetic materials will fully benefit from the boom of the new energy industry. Soft magnetic: the company's output and market share of manganese tetroxide ranks first in the world, with 55000 tons of manganese tetroxide, including 50,000 tons of electronic manganese tetroxide and 5000 tons of battery grade manganese tetroxide. Thanks to the field of new energy vehicles and energy storage, the demand for lithium materials such as lithium manganate and lithium ferromanganese phosphate is increasing, and the price of manganese tetroxide is rising rapidly; in addition, the company still plans to add 10,000 tons of battery-grade manganese tetroxide production capacity. The company currently has a production capacity of 3000 tons of metal soft magnetic powder and 1000 tons of metal magnetic powder core. after the expansion, the company will have an annual production capacity of 5000 tons of metal magnetic powder and 7000 tons of gas atomized metal soft magnetic powder. In addition, the company has a production capacity of 5000 tons of soft magnetic devices. In terms of permanent magnets, the company has 20000 tons of permanent magnet ferrite devices, 2000 tons of rare earth permanent magnet devices production capacity, and have plans to expand production.
Lithium cathode materials: the layout of iron phosphate is expected to benefit from the increase in the permeability of manganese electrode materials. The company participates in Tongling Nayuan (27%) to build iron phosphate production line, and its production capacity is expected to expand from 50, 000 tons to 150000 tons. Lithium ferromanganese phosphate has both higher energy density and economy, while manganese tetroxide can be used as a manganese source; as the leader of manganese tetroxide, the company is expected to fully benefit from the penetration of manganese electrode materials.
Testing business: the market is growing rapidly and developing into the fast lane. Under the background of steady growth and the continuous improvement of quality standards in China, the testing market is expected to grow steadily. The company focuses on the field of infrastructure testing, with test revenue of 36% CAGR and gross profit margin of more than 50% in 2017-2021. The company continues to increase investment in testing business, which is expected to become an important profit growth point of the company.
Reform of state-owned enterprises: Baowu trusteeship enjoys platform advantages and equity incentives coruscate vitality. On October 19, 2020, the company was hosted by Baowu. Baowu Group has strong strength in the iron and steel industry and new materials industry, or will usher in a win-win situation. In February 2022, the company passed the first restricted stock incentive plan, which covers a wide range of targets and is expected to inject vitality into the company.
Profit forecast and investment rating: we expect the company's income from 2022 to 2024 to be 36x49 / 6.5 billion yuan, an increase of 40%, 36%, 31%, and a net profit of 3.9, 480, 000,000,000 yuan, respectively, and the year-on-year growth rate is 82%, 24%, 41%, respectively, and the corresponding PE is 20ppm, which is lower than the valuation of comparable companies. Considering the company's future magnetic materials, the testing business is progressing smoothly, and the valuation is still low, so it is the first time to cover and give the company a "buy" rating.
Risk hint: demand is lower than expected and raw material cost fluctuates.