On March 29, the company released its 2023 annual report: In 2023, the company achieved operating income of 1,772 million yuan, +22.43% year on year, realized net profit of 332 million yuan, +46.62% year on year, and realized net profit without deduction of 305 million yuan, +53.63% year on year. The performance was in line with expectations.
Amorphous strips and flat iron cores are the twin engines for the company's performance growth. In '23, the company's amorphous alloy thin strip and its products business achieved sales revenue of 1,368 billion yuan, +24.3% year over year, sales volume of 88,700 tons, or +26.1% year-on-year, with an average price of about 15,700 yuan per ton. Achieved gross profit margin of 34.2%, +3.7pct year over year. Mainly due to the continuous growth of downstream power distribution and user-side amorphous transformers in 23, the average price per ton of superimposed competitor silicon steel was higher in 23 years, about 17,600 yuan. Demand for amorphous strips was strong, and the scale effect diluted the unit cost. According to our estimates, the CAGR for amorphous alloy strip demand in China is expected to be 20.6% in 2021-2026. The company currently has an amorphous production capacity of 90,000 tons. It is the largest supplier of amorphous alloy thin strips in the industry, and is expected to fully benefit from the growth of the industry.
The nanocrystals and magnetic powder business structure was optimized, and growth was steady. In '23, the company's nanocrystalline business achieved sales revenue of 227 million yuan, +5.5% year over year, sales volume of 5060 tons, +10.7% year over year, average price per ton was about 44,800 yuan, gross profit margin of 19.4%, and -3.6 pct year on year. The magnetic powder business achieved sales revenue of 142 million yuan, +11.6% year over year, sales volume of 7266 tons, +19.8% year over year, average price per ton of about 19,600 yuan, gross profit margin of 11.2%, and +9.4 pct year on year. The company leads the market in the thinness of nanocrystalline strips, and the 5,000-ton fund-raising project can further increase profitability. Magnetic powder production capacity is increasing year by year, and it has obtained qualified supplier certification from leading companies in the terminal industry.
The share of overseas revenue continues to rise, and processing technology continues to break through. In '23, we achieved overseas revenue of about 652 million yuan, +38.5% year-on-year, accounting for about 37.6% of total revenue, or +5pct. Overseas sales of amorphous alloy series products have reached a record high, and new market breakthroughs have been achieved one after another in Europe, Latin America, Africa, etc.
The United States, the European Union, etc. have successively proposed new energy efficiency standards for distribution transformers, and overseas market demand may further exceed expectations. The market share of the amorphous three-dimensional coil core industrialization technology developed by the company continues to increase.
The amorphous motor market has broad prospects and may become the company's next rapid growth point. Amorphous alloys can replace unoriented silicon steel sheets in stator cores, reduce motor iron loss, and become a new choice to break through motor power density bottlenecks. (1) In the field of new energy vehicles: GAC Aian launched the world's first “nanocrystalline - amorphous” ultra-efficiency motor, which can reduce motor core loss by 50%, and the maximum efficiency reaches 98.5%. As a supplier of GAC Aian, the company is actively deepening the development of amorphous materials for the application of motors under various mobile loads. (2) Robotics field: Amorphous alloys can be used in servo motors to improve motor efficiency and reduce joint load. The company will focus on the development and processing of related materials.
Maintain a “Highly Recommended” investment rating. In 2024-2026, the company is expected to achieve net profit of 388, 4.52, and 534 million yuan, corresponding to price-earnings ratios of 25.4, 21.8, and 18.5 times, which is highly recommended.
Risk warning: Downstream demand falls short of expectations, penetration rate of new materials is lower than expected, and secondary market fluctuations.