Incident: The company announced its 2023 results. Q4 results are under pressure and are basically in line with expectations. 1) In 2023, it achieved revenue of 6.69 billion yuan (yoy -6.7%), net profit due to mother of 550 million yuan (yoy -19.8%), net profit after deducting net profit of 490 million yuan (yoy -27.7%), gross margin of 16.1%. After deducting factors such as exchange gains of 150 million yuan from Hong Kong stock listing financing in 2022 and additional R&D expenses of 16.4 million yuan this year, the company's net profit in 2023 remained stable compared to 2022. 2) 2023Q4 achieved revenue of 1.64 billion yuan (yoy -16.1%, qoq +1.1%), net profit to mother of 70 million yuan (yoy -19.8%, qoq -57.1%), net profit after deducting non-return to mother of 60 million yuan (yoy +371.0%, qoq -63.2%), mainly due to rising costs and falling gross margin (14.5% in Q4).
Production increased 18.2% year on year in '23, and grain boundary penetration technology products accounted for 87.3% (yoy+9.3pct). 1) In '23, the company's capacity utilization rate was over 90%, the output of high-performance rare earth permanent magnet materials was 15,154 tons (yoy +18.5%), and Q4 output was 4189 tons (yoy +28.2%, qoq -2.0%). 2) In '23, the company used grain boundary permeation technology to produce 13,226 tons of high-performance rare earth permanent magnet material products (yoy +32.7%), accounting for 87.28% (yoy+9.3pct) of total output. Q4 used grain boundary permeation technology to produce 3862 tons of high-performance rare earth permanent magnet material products, accounting for 92.2% of the total output.
New energy vehicles are booming. Year 23 1) New energy vehicles and auto parts: revenue of 3.30 billion yuan (yoy +14.3%), sales volume of about 3.9 million new energy passenger vehicles, with a market share of about 28.5%; 2) Energy-saving inverter air conditioning: revenue of 1.32 billion yuan, which can be equipped with about 54 million inverter air conditioning compressors; 3) Wind power generation: revenue of 585 million yuan, with an installed capacity of about 3.9 GW; 4) Robots and industrial energy-saving motors: revenue of 220 million yuan.
Actively expand production capacity and lay out the field of humanoid robots. 1) The three major production bases in Ganzhou, Baotou and Ningbo have a rough production capacity of 23,000 tons by the end of 2023. The Baotou Phase II production capacity project, the Ningbo 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 being built according to plan. It is expected that 38/40,000 tons of production capacity will be built in 2024/2025. 2) Mexico plans to build a new production line project with an annual output of 1 million units/set of magnetic components. After completion of the project, it will form a production capacity of 1 million units/set of magnetic components per year, mainly used in fields such as humanoid robots and new energy vehicles.
Maintain an increase in holdings rating. Due to falling rare earth prices and increased competition, the gross margin forecast for the NdFeB business was lowered from 18% 18% to 15.5%/15%, the profit forecast was lowered, and the profit forecast for 26 years was added. The estimated net profit for 24-26 was RMB 7.05/1.02 billion (the original forecast for 24-25 was RMB 11.3/1.39 billion), and the corresponding PE was 30/23/21 times. In recent years, the company has actively expanded production to seize the field of new energy vehicles, and has laid out the humanoid robot field to drive the company's performance growth and lead the industry in technology, production capacity, and cost. PE was lower than that of Zhongke Sanhuan in 24/25 (34/27 times higher than Jinli Permanent Magnet, respectively), so it maintained an increase in holdings.
Risk warning: downstream demand fell short of expectations, rare earth prices fluctuated greatly, and construction progress of production expansion projects fell short of expectations.