Financial highlights: The company disclosed its 2023 annual results forecast, achieving revenue of 6.688 billion yuan, a year-on-year decrease of 6.66%; net profit to mother of 564 million yuan, a year-on-year decrease of 19.78%.
Volume increases and prices fell, and falling rare earth prices dragged down performance. The company's revenue failed to achieve positive growth in 23, mainly due to a sharp drop in the price of rare earth raw materials. Taking the metal praseodymium as an example, the average tax-inclusive price at the end of '23 was 557,500 yuan/ton, down 36.4% from 886,400 yuan/ton at the beginning of the year. Although the total sales volume of the company's high-performance rare earth permanent magnet materials in '23 was 151,000 tons, an increase of 25.6% over last year, the increase in volume was not worth the price drop. The net profit growth rate was not as high as the revenue growth rate, mainly due to the time difference between raw material procurement and sales of finished products. During the price decline cycle, raw material costs fell less than the sales price of finished products, which led to a decline in product profitability.
Looking ahead to 2024, production capacity expansion will help increase production and sales. By the end of 23, the company had an annual production capacity of 23,000 tons of high-performance NdFeB permanent magnet material blanks, and the annual capacity utilization rate reached more than 90%. Projects such as the Baotou Phase II 12,000 tons/year production capacity project, Ningbo's 3,000 tons/year high-end magnetic materials and 100 million sets of components are being built according to the plan. It is expected that 38,000 tons/year rough production capacity will be built by the end of '24. In '23, the company's revenue in the field of new energy vehicles and auto parts reached 3.03 billion yuan, accounting for 49.4%. According to Frost & Sullivan's report, the global NEV market's compound annual growth rate of rare earth permanent magnet material consumption was 24.2% from 23 to 28. As a leading supplier of magnetic steels for drive motors in the global NEV industry, the products were used by the top ten global NEV manufacturers, with a market share of 28.5% in 2023. As production capacity expands and industry demand grows, the company's NEV product sales are expected to continue to increase their contribution this year.
Technology-leading rare earth permanent magnet powerhouse lays out magnetic components to enhance competitiveness. The company has leading grain boundary penetration technology. In 2023, the company used grain boundary infiltration technology to produce 13,000 tons of high-performance rare earth permanent magnet material products, accounting for 87.28% of the company's total product output during the same period, an increase of 9.34 percentage points over the same period last year. At the same time, the company plans to invest in the construction of a “production line project with an annual output of 1 million units/magnetic module” in Mexico and extend it downstream. After the project is completed and delivered, it will help enhance the company's market competitiveness in fields such as humanoid robots.
Profit forecast: The company's net profit for 2024-2026 is expected to be 6.57/8.47/1,099 million yuan, EPS 0.49/0.63/0.82 yuan respectively, corresponding to the 2024.4.1 closing price of 15.71 yuan, and PE 32/25/19, respectively. Maintain the company's “Recommended” rating.
Risk warning: downstream demand falls short of expectations; raw material prices may fluctuate significantly.