Introduction to this report:
In 2023, the company actively exploited new markets, better hedging the decline in consumer electronics demand. The company's new cost reduction process continues to advance. Combined with the implementation of the fund-raising project, it is expected that the company's production volume and performance will be steadily released in 2024.
Key points of investment:
Maintain an “Overweight” rating. According to the company's performance report, the company achieved revenue of 369 million yuan in 2023, a year-on-year decrease of 13.68%, and realized net profit of 83 million yuan, a year-on-year decrease of 16.15%. The company's performance was slightly lower than expected. Taking into account the company's weak downstream demand, the company's 2023-25 net profit was lowered to RMB 0.83/1.28/148 million yuan (previously RMB 133/1.65/179 million yuan), and the corresponding EPS was RMB 0.97/1.5/1.73 yuan, respectively. Considering the declining sector valuation level and the company's high growth rate, the company was given a valuation of 30 times PE, which was slightly higher than the industry average in 2024 (the industry average was 29.22 times PE), and the company's target price was lowered to 45 yuan (originally 62.4 yuan) to maintain the “gain” rating.
The cost reduction process continues to advance, and there is plenty of room for future growth. By using low-content iron sources to replace high-purity iron, the company greatly reduces the raw material cost of carbonyl iron powder, while enriching high-value metal by-products and increasing profit margins. New process products can replace existing mainstream electrolysis, atomization and other products.
According to the company's investor relations record table, downstream customers are highly receptive to samples produced by the company's new process, and we expect that the new process will greatly expand the company's future growth space.
Continue to develop new products. According to the company's investor relations record sheet, automotive inductors and magnetic suspensions are an important part of the automotive sector, and are expected to increase in the future. The company continues to develop and achieve breakthroughs in the field of automotive electronics. In the consumer electronics sector, the company's products used in folding screens are being certified in batches and production is climbing. Relying on technical advantages, the company actively develops new products.
The fund-raising project brought about an increase in iron carbonyl powder. The company's publicly funded carbonyl iron powder project will gradually be put into operation in 2023, and 2024 will be the first year of concentrated production release. We expect that the commissioning of the company's fundraising project will bring significant growth to the company in 2024.
Risk warning: Newly built production capacity falls short of expectations, and consumer electronics demand continues to decline.