Incident: The company released its 2023 annual report, and performance was under pressure. The company's revenue in 2023 was 6.688 billion yuan, -6.66% year on year; net profit to mother was 564 million yuan, -19.78% year on year; net profit after deducting non-return to mother was 493 million yuan, -27.68% year on year.
The sharp drop in the price of rare earth raw materials in 2023 had an adverse impact on the company's revenue and gross margin. According to data published by Asia Metal Network and the China Rare Earth Industry Association, the average price of praseodymium metal in January to December 2023 was 651,400 yuan/ton, down about 35.64% from the average price of 1.012,000 yuan/ton for the same period in 2022. In addition, the average price in January 2023 was 876,400 yuan/ton, and the average price by December 2023 was 557,500 yuan/ton. Prices of rare earth raw materials have fluctuated greatly since the beginning of 2023. Due to short-term transmission differences between costs and sales prices, there will be a certain impact on gross margin decline.
The company's product production and sales volume has increased, and the product structure has been optimized. In 2023, the company's total output of high-performance rare earth permanent magnet materials was 15,154 tons, of which 13,226 tons of high-performance rare earth permanent magnet products were produced using grain boundary penetration technology, which was +32.72% year-on-year, accounting for 87.28% of the company's total product output during the same period, an increase of 9.34 percentage points over the same period last year. In 2023, the total sales volume of the company's high-performance rare earth permanent magnet materials was 15,122 tons, +25.60% year-on-year. In 2023, the company's revenue in the field of new energy vehicles and auto parts reached 3.303 billion yuan, +14.33%; revenue in the field of energy-saving inverter air conditioning reached 1,324 million yuan; revenue in the field of wind power generation reached 585 million yuan; and revenue in the field of robots and industrial servo motors reached 217 million yuan; in addition, the company also actively deployed new energy, energy saving and environmental protection fields such as 3C, energy-saving elevators, and rail transit.
Demand for rare earth permanent magnets is growing rapidly, and the company is expected to seize the opportunity to rapidly expand production and benefit from market growth. According to Frost & Sullivan's report, global consumption of high-performance rare earth permanent magnet materials increased from 47,500 tons in 2018 to 102,500 tons in 2023, with a compound annual growth rate of about 16.6%. Global consumption of high-performance rare earth permanent magnets will reach 2271,000 tons by 2028, with a CAGR of 17.2% from 2023 to 2028. The company's NdFeB blank production capacity is expected to expand to 40,000 tons by 2025. In addition, it is also planning to invest in the construction of a “Mexico project to build a new production line with an annual output of 1 million units/set of magnetic components”, which is expected to benefit from market growth in the future.
Profit forecast: In 2024-2026, the company's total revenue is expected to be 77.74/94.65/11.320 billion yuan, respectively, and net profit to mother is 840/10.79/1,292 billion yuan, respectively, corresponding to 24.64/19.17/16.02 times PE in 24-26.
It is predicted that the company's performance will grow rapidly with the release of production capacity. As an industry leader, the company is leading in technology, expanding production rapidly, and maintaining a “buy” rating.
Risk warning: competition in the NdFeB magnet industry is intensifying; the company's production capacity construction falls short of expectations; the company's technological innovation capacity falls short of expectations