Annual report performance: In '23, the company achieved revenue of 1,772 billion yuan, yoy +22.4%; net profit to mother of 332 million yuan, yoy +46.6%; deducted non-net profit of 305 million yuan, yoy +53.6%. Among them, Q4 achieved revenue of 469 million yuan, yoy +12.4%, +3.1% month-on-month; net profit to mother was 94 million yuan, yoy +24.8%, or +26.8% month-on-month.
Amorphous supply and demand are booming, and the share of exports has further increased
Revenue side: Volume increased significantly, and the share of exports increased further. Volume: Amorphous, nanocrystalline, and magnetic powder sales reached 873/0.51/0.73 million tons respectively, and yoy +26.1%/+10.7%/+19.8% achieved significant growth, mainly due to the continuous release of production capacity for new amorphous strips and soft magnetic powder, and strong order demand. Price: According to our estimates, the sales unit price of amorphous, nanocrystalline, and magnetic powder was 1.57/4.48/19,600 yuan/ton, respectively, yoy -1.5%/-4.7%/-6.8%. Affected by the reduction in raw material costs, the product price dropped slightly. Export share: Overseas revenue of main business is 652 million yuan, yoy +38.5%, accounting for 37.5% of main business revenue, accounting for 47.7% of amorphous revenue, yoy+4.9pct, efficiently developing overseas markets.
Profit side: Profitability continues to increase. The gross margins of amorphous/ nanocrystal/ magnetic powder were 34.2%/19.4%/11.2%, yoy+3.7pct/-3.6pct/+9.4pct, respectively. The gross margin of amorphous and magnetic powder increased significantly, and the profitability of magnetic powder increased significantly. In terms of costs, R&D expenses yoy +27.1%, mainly due to the 35.9% increase in the number of R&D personnel in the company in 23, reflecting the acceleration of the pace of new product layout. In the end, it was recorded that the company's gross margin/net margin in '23 was 30.49%/18.74%, yoy+3.68pct/+3.07pct, respectively.
Amorphous demand space is vast, and new scenarios for motors and AI open up growth space Amorphous sector: amorphous transformers have broad replacement space; domestically, power grid construction is relatively poor, and electricity consumption is growing rapidly; in Southeast Asia, power grid construction is relatively backward, and electricity consumption is growing rapidly; Europe and the US are actively promoting energy efficiency improvement standards for transformers. The EU's 584 billion euro power grid upgrade plan may become a catalyst for the accelerated penetration of amorphous transformers. In terms of new application areas, the high efficiency, weight, and high power output characteristics of amorphous motors make them an ideal choice for flying vehicles to improve battery life. With the rise of the low-altitude economy, amorphous motors are expected to continue to boost demand for amorphous alloys from 0 to 1. Driven by strong demand for transformers and the expansion of amorphous motor applications, amorphous strips are expected to see a sharp rise in volume and price. As a global amorphous production base, the company's design capacity has reached 90,000 tons, and the global layout is gradually improving, which is expected to fully benefit.
Magnetic powder sector: As AI computing power increases demand, there is a clear trend in integrated molding inductors. Combined with smart home appliances and new energy sector boom transmission, there is broad room for inductive materials to grow. The company's magnetic powder production capacity has climbed. At the same time, soft magnetic powder cores in the automotive sector have achieved stable mass production. The overall profit level of the sector has improved markedly in '23, waiting for further release of production capacity and product expansion.
Investment advice: As a leader in the amorphous materials industry, the company's performance is expected to maintain rapid growth with the release of production capacity and the release of new products. We expect net profit of 4.03/468/554 million yuan from 24-26, corresponding to the current stock price 24/21/18X, maintaining a “buy” rating.
Risk warning: risk of technological upgrading and iteration; risk of core technology leakage; risk of shortage or loss of core technical personnel; risk of downstream demand falling short of expectations; risk of raw material price fluctuations.