Performance is under pressure in the short term, and profit levels are rising steadily
According to the company's 2023 performance report announcement, the company expects to achieve operating income of 39.42 billion yuan in 2023, a year-on-year decrease of 18.25%, and is expected to achieve net profit of 1.60 billion yuan to mother, an increase of 10.57% over the previous year. The decline in revenue pressure is mainly due to the fact that in 2023, the company's new energy materials and rare earth business was affected by declining prices of raw materials and products.
In 2023, the company's tungsten and molybdenum business/energy new materials business/rare earth business achieved revenue of 165.9/172.29/5.471 billion yuan respectively, with year-on-year changes of +26.03%/-40.06%/-10.89%, and achieved total profit of 23.46/58/ 142 million yuan respectively, with a year-on-year increase of +61.76%/-54.99%/-55.19%.
High-end tungsten and molybdenum business gains strength, contributing to major profits
The performance of some of the company's existing tool products is already at the same level as similar imported high-end products, and there is a clear trend of domestic import substitution for related products; as the only large-scale supplier of tungsten wire for photovoltaics in the market, the company has an extremely high market share and sufficient orders. By the end of September 2023, the number of in-hand orders reached more than 5 times the production capacity of 51.8 billion meters at the time.
In 2023, the company's overall tungsten and molybdenum business improved, and production, sales and profits of major deep-processing products maintained an upward trend. Among them, fine tungsten wire products mainly benefited from the competitive advantages of fine tungsten wire for photovoltaics in terms of technology, quality, scale, etc., and production and sales grew rapidly. In 2023, the company achieved sales volume of 86.8 billion meters of fine tungsten wire products, an increase of 219% year on year, and sales revenue increased 169% year on year.
Actively promote production capacity construction and create new growth points
Some production lines of the company's Xiamen Honglu Fine Tungsten Wire 60 billion meter production line construction project have been put into production. The company plans to distribute no more than 4 billion yuan in capital to specific targets. After deducting the issuance fee, it is intended to be used for the hard alloy cutting tool production expansion project, the 100 billion meter photovoltaic tungsten wire production line construction project, the Bobai County Youmapo tungsten and molybdenum mine construction project, and supplementary working capital. The three projects are expected to be built for 5, 4, and 4 years, respectively, with high net profit. It is expected that the production year will contribute 140 million yuan, 250 million yuan, and 68.66 million yuan respectively. The company's continuous production capacity construction will further consolidate the company's leading position in the industry, increase the market share of high-end products, and provide a strong guarantee for corporate performance.
Investment advice
We expect the company to achieve operating income of 394.20/434.17/48.965 billion yuan in 2023/2024/2025, with year-on-year changes of -18.25%/+10.14%/+12.78%; net profit to mother was 15.99/21.33/2,675 billion yuan, respectively, up 10.57%/33.40%/25.39% year-on-year, and corresponding EPS of 1.13/1.50/1.89 yuan respectively. Based on the closing price of 19.62 yuan on March 25, 2024, the corresponding PE corresponding to 2023-2025E was 17.40/13.04/10.40 times, respectively. Maintain a “buy” rating.
Risk warning:
Raw material price fluctuation risk, market competition risk, demand falling short of expectations risk, international trade risk, exchange rate fluctuation risk, etc.