Magnetic material leader, production capacity continues to expand. Jinli Permanent Magnet is a high-tech enterprise integrating R&D, production and sales of high-performance NdFeB permanent magnet materials, magnetic components and comprehensive recycling of rare earth permanent magnet materials. It is a leading supplier of high-performance rare earth permanent magnet materials in the fields of new energy, energy saving and environmental protection. The majority shareholder of the company is Jiangxi Reed Venture Capital, with a shareholding ratio of 28.79% as of the end of 2023. The final controlling shareholders are Mr. Cai Baogui, Mr. Li Xinnong, and Mr. Ho Chi Bin, and the concerted actors.

Deploy overseas to enhance competitiveness in the field of humanoid robots. By the end of 2023, the company had an annual production capacity of 23,000 tons of high-performance NdFeB permanent magnet material blanks, and the full capacity utilization rate of 2023 was over 90%.

The company expects to build a production line with a rough production capacity of 38,000 tons/year by the end of 2024. The company plans to build a production capacity of 40,000 tons of high-performance rare earth permanent magnet materials and an advanced magnetic component production line by 2025. Overseas, the company plans to invest in the construction of a “Mexico project to build a new production line with an annual output of 1 million units/magnetic module” in Mexico. The project will help enhance the company's market competitiveness in fields such as humanoid robots and new energy vehicles.

In terms of output, in 2023, the company produced 15,154 tons of rare earth permanent magnet materials, an increase of 18.52%. Of these, 13,226 tons were produced using grain boundary penetration technology, an increase of 32.72%, accounting for 87.28% of the company's total product output during the same period. In 2023, the company sold 15,122 tons of high-performance rare earth permanent magnet materials, an increase of 25.60%.

We believe that the company is in a leading position in production capacity in the rare earth magnetic materials industry, which will help the company maintain strategic collaboration with leading upstream and downstream enterprises in the industry.

Cooperate with rare earth suppliers to stabilize the source of raw materials. The company has built production plants in Ganzhou, Jiangxi, the main producer of heavy rare earths, and Baotou, Inner Mongolia, the main producer of light rare earths. The company has established long-term strategic partnerships with major rare earth raw material suppliers, including Northern Rare Earth Group and China Rare Earth Group. We believe this will help the company stabilize the supply of raw materials and help the company control the cost of raw materials.

Connect with major downstream customers and jointly explore new demand for magnetic materials. The company embraces major downstream customers. In the field of new energy vehicles, the top ten new energy vehicle manufacturers in the world have all adopted the company's products; in the field of energy-saving inverter air conditioning, eight of the top ten global manufacturers of inverter air conditioning compressors are the company's customers; in the field of wind power generation, five of the top ten global wind power manufacturers are the company's customers. The company is also an important supplier of high-performance magnets in the fields of robotics, 3C, energy-saving elevators, rail transit, etc. The company actively cooperates with world-renowned customers in the research and development of magnetic components for humanoid robots.

Profit forecasting and ratings. Jinli Permanent Magnet is a leading enterprise in the magnetic materials industry. The company has leading R&D and production capabilities, a stable supply source for raw materials, and maintains extensive cooperative relationships with major downstream customers. We expect the company's 2024-2026 EPS to be 0.64, 0.88 and 1.16 yuan/share, respectively. Referring to the valuation level of comparable companies, the first coverage gave the company a PE valuation of 28-30 times in 2024, corresponding to a reasonable value range of 17.92-19.20 yuan, giving it a “superior to the market” rating.

Risk warning. Demand for new energy vehicles grew less than expected, and alternative technologies such as rare earth motors were being promoted faster than expected.