Short-term performance is under pressure, and product structure is continuously optimized
On the evening of March 29th, the company released its 2023 annual report. In 2023, the company achieved operating income of 6.688 billion yuan, a year-on-year decrease of 6.66%, including overseas sales revenue of 1,249 billion yuan, a year-on-year increase of 52.57%; realized net profit of 564 million yuan, a year-on-year decrease of 19.78%; the decline in net profit was mainly due to exchange earnings of 150 million yuan in 2022 due to Hong Kong stock listing financing and an increase in R&D investment in 2023 compared to 2022.
In 23Q4, the company achieved operating income of 1,637 billion yuan, a year-on-year increase of 1.06%, a year-on-year decrease of 16.10%; realized net profit of 69 million yuan, a decrease of 57.05% month-on-month, and an increase of 335.17% year-on-year.
By product area, the company's products in 2023 mainly involved new energy vehicles and auto parts, energy-saving inverter air conditioners, wind power generation, and robots and industrial servo motors, which achieved revenue of 3.03 billion yuan, 1,324 million yuan, 585 million yuan and 217 million yuan respectively. Among them, revenue from the new energy sector increased by 14.33% year on year; in addition, the company is also actively deploying new energy, energy saving and environmental protection fields such as 3C, energy-saving elevators, rail transit, etc., and has become one of the important suppliers of high-performance magnets in these fields.
The share of high-performance magnetic materials is increasing. The core technology remained industry-leading. In 2023, the company's total output of high-performance rare earth permanent magnet materials was 15,154 tons, an increase of 18.52% over the same period last year. Among them, 13,226 tons of high-performance rare earth permanent magnet products were produced using grain boundary penetration technology, an increase of 32.72% over the same period last year, 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. In 2023, the total sales volume of the company's high-performance rare earth permanent magnet materials was 15,122 tons, an increase of 25.60% over the same period last year.
In 2023, the company spent 354 million yuan on R&D, accounting for 5.29% of revenue.
Production capacity is gradually being implemented, and product delivery capacity is strong
Currently, the company has an annual production capacity of 23,000 tons of high-performance NdFeB permanent magnet material blanks, and the full capacity utilization rate of 2023 will reach more than 90%. The Baotou Phase II 12,000 tons/year 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 under construction. It is expected that a 38,000 tons/year rough production capacity production line will be built by the end of 2024.
The company plans to invest in the construction of the “Mexico Project to Build a New Production Line with an Annual Output of 1 Million Units/Magnetic Module” in Mexico. After the project is completed and delivered, it will have a production capacity of 1 million units/set of magnetic components per year. It helps enhance the company's market competitiveness in fields such as humanoid robots and new energy vehicles.
High-performance rare earth permanent magnet materials are widely used, and market demand is growing rapidly. According to Frost & Sullivan's report, global consumption of high-performance rare earth permanent magnet materials increased from 47,500 tons in 2018 to 102,500 tons in 2023, with a compound annual growth rate of about 16.6%. Global consumption of high-performance rare earth permanent magnets will reach 2271,000 tons by 2028, with a CAGR of 17.2% from 2023 to 2028.
Humanoid robots are expected to become a new frontier. In October 2023, the Ministry of Industry and Information Technology issued the “Guiding Opinions on the Innovation and Development of Humanoid Robots”, which first raised the humanoid robot industry to the national level. The aim is to establish an innovation system by 2025, break through core technology, and ensure the supply of core components. According to Frost & Sullivan's report, the global humanoid robot market will consume 2887.5 tons of rare earth permanent magnet materials, with a compound annual growth rate of about 162.2% from 2023 to 2028.
Investment advice
We expect the company to achieve operating income of 86.81/108.28/12.067 billion yuan in 2024/2025/2026, with year-on-year growth respectively
29.80%/24.73%/11.45%; net profit to mother was 838/11.00/1,228 million yuan, respectively, up 48.58%/31.35%/11.59% year-on-year, and corresponding EPS was 0.62/0.82/0.91 yuan, respectively. Based on the closing price of 14.88 yuan on April 16, 2024, the corresponding PE corresponding to 2024-2026E was 23.89/18.19/16.30 times, respectively. Maintain a “buy” rating.
Risk warning:
The macroeconomy exceeded expectations, downstream demand fell short of expectations, project construction fell short of expectations, etc.