The SMC market size will reach 10.748 billion yuan by the year 25, and the company plans to produce 106,000 tons. The gross margin of the acquisition of Deqing Xinchen is expected to increase. Metal soft magnetic materials are mainly used in photovoltaic energy storage, new energy vehicles, inverter air conditioners, and UPS fields. By '25, the total market size of soft magnetic metal powder cores was 10.748 billion yuan, with a compound growth rate of 22.86% from 2021-2025. (1) Global metal soft magnetic powder core market size in the field of photovoltaic energy storage series inverters is 3.765 billion yuan, 2021-2025 compound growth rate of 45.63% (2) rapid hybrid growth, increased penetration rate of pure electric 800V platforms, global metal soft magnetic powder core market size of 3.17 billion yuan in the field of new energy vehicles and charging piles, a compound growth rate of 39.98% in 2021-2025 (3) The global market size of metal soft magnetic powder cores in the field of UPS and inverter air conditioning is 26.40 billion yuan and 1,178 billion yuan, 2021-2025, 2021-2025 The compound growth rates were 4.08% and 9.93%, respectively.
The company plans 66,000 tons of SMC for Shanxi Dongmu Magnetoelectric and 40,000 tons of SMC for Zhejiang Dongmu Keda Magnetoelectric, with a total planned production capacity of 106,000 tons; the company acquired the milling company Deqing Xinchen in '22, and the gross margin is expected to increase in the future.
Demand for MIM is expected to continue to grow, and folding screen hinges are expected to open up room for growth. Far away, Spark's investment in Shanghai Fuchi is expected to integrate resources from both sides. According to the forecast of Huajing Industrial Research Institute, the global MIM market is expected to reach US$5.26 billion by 2026, with a compound growth rate of 7.94% in 2022-2026. Global sales of folding screen phones are expected to reach 48.1 million units by 2027. Demand for MIM for rapidly growing folding screen phones will also grow rapidly. The company's three MIM production bases (Shanghai, Dongguan and Lianyungang) develop collaboratively. As a Huawei supply chain enterprise, the company is expected to benefit from leading folding screen mobile phone brands in domestic market share. Yuanzhi Spark's investment in Shanghai Fuchi is expected to complement each other's superior resources and further enhance the competitiveness of the company's MIM products.
Domestic automotive P&S parts have broad prospects, and the company's market share is high and its position in the industry is stable. According to Huajing Industrial Research Institute and BCC Research, the global powder metallurgy market is expected to reach 34 billion yuan in 2027, with a compound growth rate of 4.11% in 2021-2027. According to the Huajing Industrial Research Institute and the China Powder Metallurgy Association, the national powder metallurgy market is estimated to reach 18.3 billion yuan in 2023. The average amount of powder metallurgy products used in a single vehicle in the US is 19.5 kg, Europe is 14 kg, Japan is 9 kg, and China is only 6.3 kg. With the technological development of domestic powder metallurgy companies, the amount of powder metallurgy products used in automobiles in China is expected to increase in the future. The company's market share in the domestic powder metallurgy industry reached 26.7%. Among them, Yangzhou Baolaide, which ranked second, had a market share of only 6.90%, and Jiangsu Haiying with a market share of 6.40%. The company's P&S domestic market share is relatively stable.
Profit forecasts and investment advice. The company's revenue for the year 23-25 is estimated to be 42.80/ 48.99/5.650 billion yuan, net profit of 1.50/2.04/305 million yuan respectively, corresponding PE of 58.41/42.92/28.75 times, respectively. Comparable companies selected three magnetic materials companies. Comparable companies' average PE was 32.25/22.93/16.71 times. Driven by the company's SMC, MIM, and P&S sectors, with the increase in SMC production capacity and demand for MIM and P&S, future performance is expected to enter a harvest period. We believe that the company can enjoy a certain valuation premium and be given a “buy” rating for the first time.
Risk warning: The company's SMC production capacity expansion fell short of expectations; sales of folding screen phones fell short of expectations; and the company's product technology development fell short of expectations.