Incident: Jinli Permanent Magnet released its 23rd annual report. In 2023, it achieved operating income of 6.688 billion yuan, -6.7% year on year; realized net profit of 564 million yuan, -19.8% year on year; deducted non-net profit of 493 million yuan, -27.7% year on year.
Among them, 23Q4 achieved operating income of 1,637 billion yuan in a single quarter, -16.10% year-on-year, +1.06% month-on-month; realized net profit of 69 million yuan, +335.17% year-on-year, and -57.05% month-on-month; realized deducted non-net profit of 55 million yuan, +371.04% year-on-year, and -63.17% month-on-month. The performance was in line with expectations.
The decline in product prices has put pressure on the company's 23-year performance:
1) Volume: The company's total output of magnetic materials in 2023 was 15,154 tons (yoy +18.52%), of which 13,226 tons were produced using crystal boundary penetration technology, accounting for 87.28%, and sales volume of 15,122 tons (yoy +25.60%); 2) Price: The average price of rare earth prices declined sharply in 23 years. The average price of praseodymium metal praseodymium was 651,400 yuan/ton, a year-on-year decrease of 35.64%. The decline in raw material prices caused the sales price of the company's finished products from 50.5 to 381,000 yuan/ton; 3) Profit: 15.32% gross profit margin of the magnetic materials business in '23 There was a year-on-year increase of 0.22 pcts, with gross profit per ton from 7.6 to 58,000 yuan/ton, and net profit per ton (after deducting exchange earnings) from 4.5 to 37,000 yuan/ton; 4) In a single quarter, due to increased industry competition, 23Q4 gross margin was 14%, down 3.92 pcts month-on-month, lowering the annual gross margin level. Net profit margin was 9.26% → 4.22% month-on-month, down 5.04 pcts month-on-month.
New energy vehicles have become the company's largest downstream application area. The company continued to optimize its product structure. Revenue from the NEV sector reached 3.303 billion yuan in 23, up 14.33% year on year, with revenue accounting for 49%, of which 23Q4 revenue reached 55%; the air conditioning sector achieved revenue of 1,324 billion yuan, down 28% year on year, accounting for 20% of revenue; wind power revenue reached 585 million yuan, down 19% year on year, accounting for 9% of revenue. The company's revenue in the field of robots and industrial servo motors reached 217 million yuan. In addition, the company is also actively deploying new energy, energy saving and environmental protection fields such as 3C, energy-saving elevators, rail transit, etc., and has become one of the important suppliers of high-performance magnets in these fields.
Magnetic material production capacity is expanding steadily, and magnetic components are expected to open up the company's second growth curve. The company currently has a rough production capacity of 23,000 tons, with a capacity utilization rate of over 90% in 23 years. The Baotou Phase II 12,000 tons+Ningbo 3,000 ton magnetic material and 100 million magnetic module production capacity project is expected to be gradually put into use in 24 years, and the planned production capacity will reach 40,000 tons in 25 years.
The company plans to invest in the construction of a “1 million magnetic module production line project” in Mexico. It is currently progressing steadily. In 2023, the company's revenue in the field of robots and industrial servo motors reached 217 million yuan. With the expansion of the humanoid robot market, the company is expected to fully benefit.
Profit forecast and investment suggestions: We assume that the 2024-2026 magnetic material shipments are 27,000, 33,000 tons (rough caliber), and the company's net profit to mother is 6.94, 8.51, and 999 million, respectively. According to the market value of 20.7 billion yuan at the close of March 29, the corresponding PE is 29.8, 24.3, and 20.7X, respectively, maintaining the company's “buy” rating.
Risk warning: Risk of product price fluctuations; project construction progress falling short of expectations; sales of new energy vehicles falling short of expectations; demand estimation deviations and delays in the use of public information in research reports; profit forecasts fall short of expectations due to changes in core assumptions; there is a risk that public data used in research reports will not be updated in a timely manner, etc.