Performance is falling under pressure, and downstream demand is sluggish
On the evening of March 15, 2024, the company released its 2023 annual report. In 2023, the company achieved revenue of 38.49 billion yuan, a year-on-year decrease of 18.67%; realized net profit of 87 million yuan, a year-on-year decrease of 66.46%, and realized net profit without deduction of 126 million yuan, a year-on-year decrease of 40.91%.
The decline in performance is mainly due to the continued fluctuation and decline in rare earth raw material prices, the growth rate of terminal demand falling short of expectations, a short-term mismatch between supply and demand in the rare earth industry, and pressure on the operation of magnetic materials manufacturers.
According to the product sector, the health equipment business contributed greatly and boosted performance. In 2023, NdFeB, electrical products, and health equipment products achieved revenue of 22.24/8.23/542 million yuan respectively, accounting for 57.79%/21.39%/14.11% of total revenue respectively. Among them, revenue from health equipment products increased by 41.06% year on year; mainly due to the pioneering application of new carbon fiber materials last year, the company's health equipment sector performance bucked the trend, which played a positive role in increasing the company's profits.
In 23 Q4, the company achieved revenue of 1,034 billion yuan, down 12.2% year on year and 9.7% month on month; realized net profit of 0.4 billion yuan, down 91.7% year on year, down 84.6% month on month; realized net profit deducted from mother 86 million yuan, up 62.3% year on year and 112 8.6% month on month.
In the fourth quarter of last year, the decline in performance was particularly evident, mainly due to low rare earth prices and the entry into a low consumption season.
Production and sales are stabilizing, and large-scale preparation before the holiday season has led to a steady increase in production and operation of products other than motor products in the short term. In 2023, NdFeB production and sales were 5499.70/5459.09 tons, respectively, up 5.18%/3.74% year on year; electric wheelchair and scooter production and sales volume were 15.09/144,800 units, up 10.87%/3.87% year on year, and inventory volume was 16,400 units, up 59.22% year on year. The short-term increase in inventory was due to the increase in the company's preparations before the Spring Festival for export business, which led to a large increase in inventory at the end of the period.
Optimistic about the development prospects of humanoid robots empowered by AI
According to GGII forecasts, the penetration rate of global humanoid robots in service robots is expected to reach 3.5% by 2026, the market size will exceed 2 billion US dollars, and the global market size is expected to exceed 20 billion US dollars by 2030; the Ministry of Industry and Information Technology issued the “Guidelines for the Innovation and Development of Humanoid Robots”, which is expected to achieve mass production of humanoid robots by 2025, and the comprehensive strength will reach the world's advanced level in 2027, and the humanoid robot market is about to usher in rapid growth.
Assuming that the humanoid robot field will be commercialized under the impetus of advanced companies such as Tesla, the 2024-2026 output will be 5/20 million units, the unit usage will be 3.5 kg, and 3,500 tons of NdFeB magnets will be consumed in 2026.
Investment advice
The company has long been deeply involved in the electromechanical and magnetic materials sector, and has accumulated strong technology and talents. Some of its products are already used in the field of industrial robots, and the future is expected to usher in new development opportunities driven by demand for humanoid and humanoid robots. We expect the company to achieve operating income of 47.26/52.36/ 5.644 billion yuan in 2024/2026, up 22.78%/10.80%/7.80% year-on-year respectively; net profit to mother was 2.83/3.20/377 million yuan, respectively, up 226.70%/12.90% year on year /17.76%, corresponding EPS was 0.25/0.28/0.33 yuan, respectively. Based on the closing price of 5.63 yuan on March 15, 2024, the corresponding PE corresponding to 2024-2026E was 22.53/19.96/16.95 times, respectively. Maintain an “Overweight” rating.
Risk warning:
Risk of price fluctuations of rare earth magnetic materials, risk of market competition, risk of demand falling short of expectations, risk of international trade risk, risk of exchange rate changes, etc.