occurrences
On March 28, the company disclosed its 2023 annual report. In 2023, the company achieved annual revenue of 6.688 billion yuan, -6.66%; net profit to mother of 564 million yuan, -19.78% year on year; 2023Q4 revenue was 1,637 million yuan, -1.06% month on month; and net profit to mother was 69 million yuan, -57.05% month on month.
reviews
Volume increased and prices fell, and gross margin bucked the trend. The company's sales volume of magnetic materials in 2023 was 15,122 tons, +25.6% year on year; we estimate that the average sales price of magnetic materials was 3812,000 yuan/ton, -24.54% year over year; unit cost was -24.74% to 322,800 yuan/ton, and unit gross profit was -23.41% to 584,000 yuan/ton. Magnetic materials business revenue -5.23% YoY to 5.765 billion yuan, gross profit -3.81% YoY to 883 million yuan, and gross margin +0.22pct YoY to 15.32%. We estimate that Q4 magnetic material sales volume was -2.76% month-on-month, average price +4.09% month-on-month to 348,800 yuan, unit cost +9.87% month-on-month to 293,500 yuan/ton, and unit gross profit -21.47% month-on-month to 47,400 yuan; rising costs led to a month-on-month decline in Q4's performance, which dragged down the company's annual performance.
The decline in exchange earnings has led to an increase in financial expenses, and investment in R&D continues to be high. The company's expenses for the 2023 period were +33% to 488 million yuan. Among them: due to the 2022 H share listing, exchange earnings declined in 2023, and financial expenses were +63% to -57 million yuan. After deducting factors such as exchange gains of $150 million in 2022 due to Hong Kong stock listing financing and additional R&D expenses of $16 million this year, the company's net profit in 2023 remained stable compared to 2022; R&D expenses were $354 million, +4.9% over the same period last year.
The NEV sector continues to gain strength, and the production of products penetrating the crystal world is expanding at an accelerated pace. In 2023, the company's revenue in the NEV and automotive sector reached 3.303 billion yuan, +14.33% year-on-year.
In 2023, the company's grain boundary penetration product output was 13,226 tons, +33% over the same period. The 5-year CAGR was as high as 62%, which is significantly higher than the company's sales growth rate of finished magnetic materials (27%).
Production capacity continues to expand, laying out magnetic component businesses in fields such as humanoid robots. The company's rough production capacity already has an annual production capacity of 23,000 tons, and the capacity utilization rate has increased to more than 90%. As the Baotou Phase II projects of 12,000 tons and Ningbo 30,000 tons continue to advance, the company plans to build a production capacity of 40,000 tons by 2025. The company actively cooperates with world-renowned customers in the research and development of magnetic components for humanoid robots and invests in the construction of a “project with an annual output of 1 million units/set of magnetic components” in Mexico.
Profit Forecasts, Valuations, and Ratings
The company's 24-26 revenue is estimated to be 75.00/89.16/10.860 billion yuan, respectively, net profit to mother of 635/8.27/1,056 million yuan, EPS 0.47/0.62/0.79 yuan, respectively, and the corresponding PE is 32.64/25.05/19.62 times, respectively. Maintain a “buy” rating.
Risk warning
Demand fell short of expectations; rare earth prices fluctuated; supply of magnetic materials exceeded expectations.