Company profile: The company has been deeply involved in the field of NdFeB magnets for more than 20 years. Its main business is R&D, production, sales and service of high-performance NdFeB permanent magnet materials and new energy vehicle motor drive systems. Driven by the high downstream boom, the company's performance increased markedly. In 2022, the company achieved sales revenue of more than 4 billion yuan in the automobile market, an increase of 119%, accounting for about 65% of revenue. Among them, NEV market revenue also increased 170%, accounting for nearly 50% of sales revenue. Furthermore, by the end of 2022, the company had a production capacity of 24,000 tons of NdFeB blanks, and the production capacity of the Nantong production base is under construction, and production is expected to reach production by 2026.

Industry: The downstream boom continues, and leading companies mostly rely on market demand to expand production. 1) Demand side: With the growing trend of low carbon and intelligence, demand for high-performance NdFeB is expected to continue to grow rapidly.

According to our estimates, the global consumption of high-performance NdFeB permanent magnet materials is expected to reach about 185,000 tons in '26, with a CAGR of 19.9% in 23-26. 2) Currently, most leading companies in the magnetic materials industry have production capacity expansion plans. According to our statistics, the total planned production capacity of the top 6 companies in 2026 will reach 178,500 tons, an increase of 42% compared to 2023. However, the production expansion plan is more based on order conditions and market demand. It is not a blind expansion of production; relevant adjustments will be made according to the actual situation in the market.

Core competitiveness: Overseas layout+innovation drive+cost control to build the company's core barriers. 1) The company has a deep layout in overseas markets and has now entered the supply chain of the world's mainstream car companies. As major foreign traditional car companies also begin to increase their layout for new energy vehicles, the company is expected to continue to benefit. At the same time, overseas customers place more importance on technology, R&D, and iteration. They also have high requirements for magnets, and the competitive environment is more friendly than domestic ones. 2) In terms of R&D strategy, the company uses the dual strategies of “superior personnel” and “rare earth resource balance” as a guideline for R&D work, binding leading joint R&D strategies to help the company maintain its leading position in the industry. 3) In terms of the raw material preparation cycle, the company uses a procurement model of “determined production by sales, defined by production, and reasonable inventory”, which has a strong ability to withstand fluctuations in raw material prices.

Profit forecast: We predict that in 23-25, the company's EPS will be 0.62, 0.79, and 1.00 yuan, respectively, and PE will be 16, 13, and 10 times, respectively. We will give the company 18 times PE in 24 years, and the corresponding target price is 14.28 yuan/share, covering the first time and giving it a “buy” rating.

Risk warning: customer progress and project commissioning fall short of expectations, fluctuating raw material prices, worsening competitive landscape, etc.