Incident: Yunlu Co., Ltd. released its 2023 annual report. The company achieved operating income of 1,772 billion yuan, an increase of 22.43% year on year; net profit attributable to shareholders of listed companies was 332 million yuan, an increase of 46.62% year on year.
Comment:
Amorphous alloy products are expanding their efforts in overseas markets. The company's amorphous alloy products include amorphous alloy thin strips and amorphous iron cores. Compared with silicon steel, they have outstanding energy saving and environmental protection characteristics. They are recyclable green materials throughout the life cycle of “manufacturing energy efficient, energy efficient use, and energy recycling”. The products are mainly used in the field of power distribution. The company's overseas sales of amorphous alloy products have reached a record high, and has successively achieved new market breakthroughs in Europe, Latin America, Africa, etc. The United States, the European Union, etc. have successively proposed new energy efficiency standards for distribution transformers to help the world embrace amorphous technology. Furthermore, in the fields of rail transit, data centers, photovoltaic wind power, public buildings, etc., the penetration rate of amorphous solutions continues to rise.
The nanocrystalline alloy and magnetic powder business continues to grow. In the nanocrystalline alloy business, the company closely collaborates with terminal customers to develop nanocrystalline material solutions for new energy vehicles to promote technological iteration of terminal magnetic material devices. Currently, the products have been applied on a large scale in products such as smartphone wireless charging modules and new energy vehicles. In the magnetic powder business, the company continues to increase investment, and production capacity is growing year by year. It has obtained qualified supplier certification from leading companies in the terminal industry, laying the foundation for further expanding market and sales channels in the future. The application of the company's nanocrystalline ultra-thin strips and magnetic powders and products in the fields of consumer electronics and new energy vehicles continues to expand, and devices or terminal products made from the company's products have been widely used by high-quality customers such as Tesla, Gree, and TDK.
The company has a leading position in the industry and continues to benefit from improved energy efficiency of transformers. In February 2024, the National Development and Reform Commission and the National Energy Administration issued the “Guiding Opinions on the High-Quality Development of Distribution Grids under the New Situation”, which proposed improving the energy efficiency and intelligence level of equipment. Accelerate the upgrading of old and energy-intensive equipment and facilities. After renovation, it is necessary to achieve the level of energy efficiency and energy saving, and strive to achieve advanced levels of energy efficiency. In 2025, power grid companies will completely eliminate S7 (including S8) and distribution transformers that have been in operation for more than 25 years and have not reached the approved level of energy efficiency. The share of transformers with energy efficiency and energy efficiency levels in operation in the whole society increased by more than 10 percentage points compared to 2021. The introduction of relevant policies has encouraged power grid equipment suppliers to usher in high growth opportunities.
Investment recommendations and ratings: The company's revenue for 2024-2026 is estimated to be RMB 2.07/27.28/RMB 3,526 billion, and net profit to mother is RMB 3.91/5.73/758 billion, respectively. Considering the gradual increase in the penetration rate of the company's amorphous alloy products in various application fields, the continuous increase in overseas sales, the continuous increase in application scenarios, and the steady development of the nanocrystalline alloy and magnetic powder business, the company was given a “buy” rating.
Risk warning: the risk that the energy efficiency improvement of transformers falls short of expectations; the risk that R&D progress in new application fields falls short of expectations; the risk that the gross margin of the company's products will fall short of expectations; the risk that performance forecasts and valuation judgments fall short of expectations.