Event

The company released its three-quarter report of 2023 on October 30th, with revenue of 269 million yuan in the first three quarters, down 21.88%, net profit of 59 million yuan, down 25.41%, and non-net profit of 54 million yuan, down 20.41%. 3Q23 realized revenue of 89 million yuan, a decrease of 11.51%; net profit of 21 million yuan, a decrease of 1.75%; and a deduction of 20 million yuan of non-net profit, an increase of 6.7%.

Comment

Q3 profit margin increased significantly, revenue is under pressure. Q3's revenue ring fell 12%, still affected by the change in the product structure of atomized alloy powder under weak consumer electronics demand. The carbonyl iron powder of the company is operating steadily, and the downstream inductor components in automotive, server and other fields have a strong demand for ultra-fine particle powder and high temperature resistant powder. thanks to the competitiveness of the core products, Q3 company's gross profit margin has reached 43.42%, a ring increase of 6.01pcts, reaching a historical high level in a single quarter, and the profitability has improved. The net interest rate of Q3 company is 23.29%, with an increase of 2.14pcts, a decrease of 0.6pcts in management expense rate and an increase in 0.43pcts in R & D expense rate.

The investment project of carbonyl iron powder and atomized alloy powder will be put into production soon. The carbonyl iron powder of the company has a particle diameter of micron and has a production capacity of 5205 tons in 22 years, of which about half are sold out, and the other half produce deep processing products such as soft magnetic powder. The company broke the monopoly of BASF in Germany and currently accounts for more than 20% of the domestic carbonyl iron powder market. 6000 tons of IPO investment project is expected to be put into production in 23 years. The company sold 723 tons of atomized alloy powder in 22 years, and 4000 tons of IPO investment project is expected to be put into production in 23 years, including 3D printing powder, high-performance magnetic powder core powder and so on. The company continues to promote the application of integrated inductors in AI chips such as high-computing graphics cards, mass production of soft magnetic powders for power, 3D printing and soft magneto and other emerging fields.

Look forward to the continuous promotion of the new project of cost reduction process of carbonyl iron powder. The key cost reduction process of the company has made a major breakthrough, creatively replacing the high purity iron of the original process with low content iron sources such as recycled materials and mineral materials with higher impurity content, and invested in the construction of "100000 tons of metal soft magnetic micro-nano powder project" in Ningxia. On the one hand, it can form a partial or complete replacement for the lower performance competitive process, on the other hand, it can improve the breadth and depth of carbonyl iron powder infiltration in the existing application fields. Expand the application in the field of high value-added, high-end electronics and power. The project is divided into three phases and is expected to start production one after another in 24 years, which is expected to open up the growth space of the company.

Profit Forecast & Investment suggestion

It is estimated that the company's revenue in 23-25 years is 488 million yuan, 625 million yuan and 843 million yuan respectively, and the net profit is 118 million yuan, 159 million yuan and 224 million yuan respectively. The corresponding EPS is 1.38,1.86,2.62 yuan respectively, and the corresponding PE is 30,22 and 16 times respectively, maintaining the "buy" rating.

Risk hint

Capacity expansion is not as expected; market demand is not as expected; senior executives reduce the risk and so on.