occurrences

On August 29, the company released its semi-annual report for 2023. 1H23 achieved revenue of 1,409 million yuan, a decrease of 1.69%; realized net profit of 170 million yuan, a decrease of 13.93%; realized net profit of 138 million yuan after deducting non-return net profit of 138 million yuan, a decrease of 15.68%. 2Q23 achieved revenue of 802 million yuan, an annualized increase of 32.13%, realized net profit of 114 million yuan, annualized increase of 103.57%, realized net profit of non-attributable income of 94 million yuan, an increase of 113.64%.

reviews

Q2 Performance doubled month-on-month, and return on investment declined. In the first half of the year, the company's industrial raw materials achieved revenue of 368 million yuan, a decline of 28.32%, demand for fluorenone fell, and manganese-based materials stabilized; electronic components (magnets) achieved revenue of 338 million yuan, a decrease of 0.38%, gross margin increase of 3.44 pcts, increased profitability; metal products and inspection and inspection business achieved revenue of 228 million yuan and 321 million yuan respectively, with gross margins of 10.99% and 30.39% respectively, achieving steady growth. In the first half of the year, the profitability of the iron phosphate business of the company's shareholding companies declined, and the company's investment income also fell 63% to 117 million yuan.

Magnetic material production capacity is steadily expanding, and Baowu is expected to empower. The company's magnetic materials cover permanent magnets and soft magnets. Currently, the production capacity of permanent magnet ferrite is 20,000 tons/year; rare earth permanent magnet production capacity is 2000 tons/year; soft magnetic ferrite production capacity is 5,000 tons/year; through renovation and expansion, the metal magnetic powder core has reached a production capacity of 5,000 tons/year, and the supporting soft magnetic powder production capacity is 8000 tons/year. 23 The company's profit margin in the magnetic materials sector was compressed due to reasons such as rising raw material prices and increased competition for product homogenization in the first half of the year. With the expansion of magnetic material application scenarios, according to the company's production capacity plan, the company's magnetic material shipments are expected to maintain a 15% increase in 23-25. China's Baowu officially implemented a restructuring with China Steel Group in July 23. Baowu will indirectly hold 32.85% of the company's shares to achieve control over the company. Baowu is expected to empower raw materials, market expansion, and cost control, and the company's profit margin in the magnetic materials sector will continue to increase.

Manganese tetroxide continues to be released, opening up room for growth in battery cathode materials. As a leading manufacturer of manganese tetroxide, the company had strong production and sales of battery-grade quadrangular manganese in the first half of the year. Currently, the production capacity of electron-grade quadrangular manganese is 50,000 tons/year for the manufacture of manganese-zinc soft magnetic ferrite; the battery-grade quadrangular manganese production capacity is 15,000 tons/year, which is used in the manufacture of lithium manganate, lithium manganese iron phosphate, and sodium-electric cathode materials.

Benefiting from increased demand, the company expects to expand its battery-grade quadrangular manganese production capacity by 10,000 tons and is expected to start production by the end of the third quarter.

Profit Forecast & Investment Advice

According to the performance situation for the first half of the year, the net interest rate for 23 years was lowered by 11%. It is estimated that the company's net profit for 23-25 years will be 402 million yuan, 515 million yuan, and 642 million yuan respectively. The corresponding EPS will be 0.53 yuan, 0.68 yuan, and 0.85 yuan respectively. The corresponding PE will be 17 times, 13 times, and 10 times, respectively, maintaining the “buy” rating.

Risk warning

There is a risk that production capacity expansion falls short of expectations, the risk of fluctuations in raw material prices, etc.