Core views
The company's net profit in 2023 was 564 million yuan, a year-on-year decrease of 19.78%. The 2023 results were affected by external factors such as fluctuations in rare earth prices, and the gross margin level declined slightly. The company's annual production of high-performance rare earth permanent magnets was 15,154 tons, an increase of 18.52% over the previous year. The proportion of grain boundary penetration technology products increased to 87.28%, and the product structure was further optimized. Among downstream customers, the NEV sector's revenue reached 3.303 billion yuan, up 14.33% year on year, accounting for 49.39% of total revenue, up 9.07 percentage points from 2022. The company's production capacity expansion is progressing steadily. It is expected that the rough production capacity will reach 38,000 tons/year by the end of 2024 and 40,000 tons/year by 2025. The Mexican magnetic component project continues to advance, continue to increase robot and new energy vehicle tracks, and the performance is expected to maintain high growth.
occurrences
Net profit to mother in 2023 was 564 million yuan, down 19.78% year on year. Jinli Permanent Magnet released its 2023 annual report. The company achieved revenue of 6.688 billion yuan, a year-on-year decrease of 6.66%; realized net profit to mother of 564 million yuan, a year-on-year decrease of 19.78%. The company's net cash flow from operating activities in 2023 was 1,518 billion yuan, an increase of 389.41% over the same period last year. The company's basic earnings per share were $0.42, a year-on-year decrease of 20.75%. In addition, it is proposed to distribute a cash dividend of 2.6 yuan (tax included) for every 10 shares to all shareholders.
Brief review
External factors such as fluctuations in rare earth prices put pressure on the company's performance
Rare earth prices fell sharply in 2023. The average annual price of praseodymium and praseodymium metal was 651,400 yuan/ton, down 35.64% year on year. The company's annual gross margin level was 16.07%, down 0.11 percentage points from 2022. After deducting the effects of factors such as exchange earnings (150 million) from the 2022 H share listing and additional R&D investment in 2023 (16 million yuan), the company's profit level in 2023 remained stable from 2022. In the fourth quarter of 2023, net profit to mother was 69.43 million yuan, down from 161.66 million yuan in the third quarter. The gross profit margin for the fourth quarter was 14.48%, down 3.95 percentage points from the third quarter. It was mainly affected by factors such as continued decline in rare earth prices, accruing year-end bonuses, increased investment in R&D, and increased costs for the period before the Ningbo base was put into operation.
The share of NEV revenue continues to rise. The customer structure continues to be optimized. In 2023, the company's revenue in the NEV and auto parts sector was 3.303 billion yuan, up 14.33% from the previous year, and the revenue from the energy-saving inverter air conditioning sector was 1,324 billion yuan. The company's revenue in the wind power generation sector was 585 million yuan, and revenue from robots and industrial servo motors was 217 million yuan. In 2023, the share of revenue in the NEV sector increased to 49.39%, up 9.07 percentage points from last year. The wind power sector accounted for 8.75% of revenue, a decrease of 1.27 percentage points, and the inverter air conditioning sector accounted for 19.80% of revenue, a decrease of 5.77 percent.
The product structure continues to be optimized, and the proportion of products produced by grain boundary permeation technology increased the company's total output of high-performance rare earth permanent magnet materials in 2023 to 15,154 tons, an increase of 18.52% over the previous year. Among them, 13,226 tons of rare earth permanent magnet materials were produced using grain boundary permeation technology, an increase of 32.72% over the same period last year, accounting for 87.28% of the company's total product output during the same period last year. The total sales volume of the company's high-performance rare earth permanent magnet materials was 15,122 tons, an increase of 25.60% over the previous year.
New production capacity is progressing steadily, and production capacity plans have nearly doubled. The company's competitiveness in the field of humanoid robots and new energy vehicles continues to increase. The company's current rough production capacity is 23,000 tons/year. The Baotou Phase II 12,000 tons/year production capacity project, Ningbo's 3,000 tons/year high-end magnetic material and 100 million module production capacity project, and the Ganzhou high-efficiency and energy-saving motor magnetic material base project are under construction. It is expected to be completed by the end of 2024 with a production capacity of 40,000 tons/year. The current progress is in line with expectations. Meanwhile, Mexico's annual production line project with an annual output of 1 million units/magnetic module is progressing steadily, which will help enhance the company's market competitiveness in the fields of humanoid robots and new energy vehicles.
Continuously return shareholders and maintain a high percentage of cash dividends
The company's 2023 profit distribution plan distributes a cash dividend of 2.6 yuan (tax included) to all shareholders for every 10 shares. The estimated dividend amount is 347 million yuan, accounting for more than 60% of the company's net profit attributable to shareholders of listed companies in 2023. Since the company went public in 2018, it has paid cash dividends every year. The cumulative cash dividends have exceeded 600 million yuan, and the cumulative cash dividend amount accounts for more than 35% of the cumulative net profit attributable to shareholders of listed companies.
The industry remains booming, and demand for high-performance rare earth permanent magnet materials is rising. According to the Frost & Sullivan report, global consumption of high-performance rare earth permanent magnets increased from 47,500 tons in 2018 to 102,500 tons in 2023, with a CAGR of about 16.6%. It is expected to reach 2271,000 tons in 2028, and a CAGR of about 17.2% in 2023-2028. Among them, new energy vehicles consume 237,600 tons, CAGR is about 24.2%; inverter air conditioning consumes 22,700 tons, CAGR is about 12.0%; wind power consumption is 24,000 tons, or CAGR is about 13.4%; industrial robots and humanoid robots consume 0.66 million tons and 0.29 million tons, and CAGR is about 13.5% and 162.2%.
Profit forecast and investment proposal: The company has built a rough production capacity of 23,000 tons/year, and is expected to form 40,000 tons/year by 2025. The company is a leading supplier of high-performance rare earth permanent magnet materials, fully benefiting from the development of new energy vehicles, wind energy, energy-saving motors, humanoid robots, etc., and is expected to have revenue of 82.73/114.26/12.884 billion yuan in 2024-2026, and net profit of 7.85/1,070/1.01 billion yuan. The corresponding PE is 26/19/17 times, maintaining a “buy” rating.
Risk warning: 1. The company's performance growth depends on the boom in industries such as new energy vehicles, wind power generation, energy-efficient motors, humanoid robots, etc.; 2. The company's new construction projects are affected by policy, land, capital, market and other factors, and construction progress may fall short of expectations; 3. High-performance NdFeB magnetic raw materials are rare earth materials, and costs are affected by fluctuations in raw materials, if raw material prices fluctuate drastically, or affect the gross profit of the company's products; 4. Other companies in the industry are also expanding production capacity if competition between industries worsens or deteriorates in the future There is a possibility that the industry will be oversupplied.