Net profit to mother decreased by -49.87% year-on-year in '23, maintaining that purchasing rating companies achieved operating income of 7.652 billion yuan, yoy -15.96%; net profit to mother was 306 million yuan, yoy -49.87% in '23. The company achieved revenue of 1,864 billion yuan (yoy +10.03%, qoq -10.78%) and net profit of 607.193 million yuan (yoy +19.94%, qoq -38.66%) in 24Q1. The company's net profit for 24-26 is estimated to be 4.20/10.42/1,491 billion yuan, respectively (the previous value was 586/1,148 million yuan in 24-25 years, respectively). Comparable to the 24-year Wind, the average PE (24E) value was 27.2X. Considering that the company relies on central enterprises and has a stable position as a leader in the magnesium industry, the company was given 35.4X for PE (24E). The company's target price was estimated at 20.88 yuan, giving it a “buy” rating.

The gross margin of magnesium alloy products fell 11.06%, which dragged down the company's overall profit year-on-year decline due to the decline in product sales prices. The company's comprehensive gross profit margin and net interest rate in '23 were 13.44%/4.66%, respectively, down -2.64pct/-2.85pct, respectively. Among them, the main magnesium alloy products had a gross profit margin of 18.08% and yoy-11.06pct, which was the main drag on the decline in the company's performance. 24Q1 Company's comprehensive gross profit margin was 11.87% (yoy+1.79pct, qoq-2.71pct). In terms of rate, the cost rate for the total period of 23 years was 8.41%, yoy+1.40pct.

The global magnesium industry declined in '23, but it may benefit the promotion and application of magnesium alloys in automotive and other fields. In 2023, the global raw magnesium production capacity was 1.63 million tons, with an output of about 1 million tons, down 9.9% year on year; global magnesium consumption was about 1.05 million tons, down 8.7% year on year. In 2023, China's raw magnesium production capacity was 1.36 million tons, raw magnesium production was 822,400 tons, a year-on-year decrease of 11.9%, and magnesium alloy production was 345,200 tons, a year-on-year decrease of 3.5%. According to Wind, the average price of magnesium ingots in '23 was about 23,700 per ton, a year-on-year decrease of 27.2%.

Along with the decline in the price of magnesium ingots, magnesium alloy materials are being used more and more widely in the automotive field; the company has successfully developed oversized magnesium alloy integrated die castings. In addition, the company has also actively laid out magnesium alloy construction templates; it also signed a cooperation agreement with Xiaopeng Flying Motor to become a designated supplier for key components such as instrument panel tube beam assemblies and middle channel left and right lower bracket assemblies.

The company actively lays out resources and lightweight materials

The company focuses on the lightweight industry, which is based on magnesium-based materials, leading the application of lightweight components, and achieving chain development of the entire industry; at the same time, it is steadily developing the advanced products business to enhance product competitiveness. The company has established production bases in Wutai, Shanxi, Qingyang, Anhui, and Chaohu with a complete industrial chain from “mining - raw magnesium smelting - magnesium alloy production”, which can not only guarantee the supply of raw materials, but also effectively reduce production costs. At the same time, the company is actively expanding the magnesium products business and aluminum products business, mainly in deep-processing products such as automotive structural parts. The company's magnesium and aluminum products business accounted for about 31% of the total gross profit in '23.

The company has cooperated with BYD, Changan Automobile, NIO, Xiaopeng, Volkswagen, Toyota and many other well-known domestic and foreign car companies.

Risk warning: Downstream demand in the industry falls short of expectations, magnesium prices have dropped sharply, and the prices of resources such as coal have risen.