On March 27, the company released its 2023 annual report. In 2023, the company achieved full-year revenue of 8.358 billion yuan, -13.97%; net profit to mother of 275 million yuan, -67.53%; 2023Q4 revenue was 1,941 billion yuan, -8.13% month-on-month, -12.11% year-on-year; net profit to mother was 52 billion yuan, -14.85% month-on-month and -77.63% year-on-year.
Sales volume remained flat, and gross profit per unit narrowed markedly. The company's sales volume of magnetic materials in 2023 was 11324.20 tons, only +0.32% year on year; considering that the company's production capacity is still expanding, it indicates that weak demand is dragging down the company's sales growth. We estimate that the average sales price of magnetic materials was 721,800 yuan/ton, -12.87%; the unit cost was -7.59% to 627,900 yuan/ton, and the unit gross profit was -36.96% to 93,900 yuan/ton. Magnetic materials business revenue -12.59% YoY to 8.174 billion yuan, gross profit -6.75% YoY to 1,063 billion yuan, and gross margin -4.97pct YoY to 13.00%.
R&D investment continues to grow, and exchange rate fluctuations increase financial expenses. The company's expenses for the 2023 period were +25% to 611 million yuan, including: sales expenses +7.35% to 146 million yuan, management expenses +6.96% to 369 million yuan; R&D expenses were 140 million yuan, +8.53% year over year; and financial expenses increased 77 million yuan due to exchange rate fluctuations.
Leading the industry in scale. The company is the magnetic material manufacturer with the highest sales revenue in China; by the end of 2023, the company's sintered NdFeB production capacity reached 25,000 tons, an increase of 3,000 tons over the end of 2022; the production capacity of the bonded NdFeB plant also reached 1,500 tons.
The product matrix is complete, combining high performance and high cost performance. The company can provide products with high comprehensive performance and high temperature stability; in terms of cost-effective products, the company has launched a series of high-abundance rare earth magnet grade products, with the highest cerium content exceeding 40% of the total rare earth content, breaking through the limitations of concentrated application of high-abundance rare earth magnets in the low-cost market and expanding them to more stringent application fields such as acoustic devices and industrial motors.
Demand for magnetic materials is expected to boost with the implementation of the “trade-in” policy. The State Council issued the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in”. Since the energy efficiency of rare earth permanent magnet motors is still at a high level and the penetration rate is low, and superimposed energy efficiency inspections are becoming stricter, there is more and more room for demand for rare earth permanent magnet materials in the industrial motor sector.
The company's 24-26 revenue is estimated to be 922/107.41/119.48 billion yuan, respectively, net profit to mother of 3.04/4.06/513 million yuan, EPS 0.25/0.33/0.42 yuan, respectively, and the corresponding PE is 36.14/27.06/21.41 times, respectively. Maintain a “buy” rating.
Demand fell short of expectations; rare earth price fluctuations exceeded expectations; exchange rate fluctuations exceeded expectations.