Net profit due to mother increased 27.08% year-on-year in '23, maintaining an increase in holdings rating

In '23, the company achieved revenue of 3,861 billion yuan (yoy +3.62%), net profit attributable to mother of 198 million yuan (yoy +27.08%), and deducted non-net profit of 149 million yuan (yoy +6.81%). Among them, Q4 achieved revenue of 1,079 million yuan (yoy +9.57%, qoq +5.93%) and net profit to mother of 909.751 million yuan (yoy +47.08%, qoq +27.64%). 24Q1 revenue was 1.02 billion yuan (yoy +37.42%, qoq +2.10%), and net profit to mother was 81.1715 million yuan (yoy +320.81%, qoq -10.78%). We expect the company's 2024-2026 EPS to be 0.49/0.65/0.80 yuan respectively (previous value: 0.42/0.53 yuan in 24-25). Comparable company Wind unanimously expected the average value of 2024PE to be 24.1X. Considering the company as the leader, the company was given 30.09XPE (2024E), corresponding to the target price of 14.74 yuan (previous value 8.92 yuan), maintaining the “gain” rating.

The gross margin of the powder metallurgy business increased significantly

The company's 23-year comprehensive gross profit margin was 22.33%, yoy+0.28pct. Among them, the gross margins of powder metallurgy, soft magnetic composites, and metal injection molding businesses were 23.51%/21.08%/19.19%, and yoy+3.63pct/-1.30pct/-3.36pct, respectively. 24Q1 Company's consolidated gross profit margin 24.03% (yoy+5.26pct, qoq-3.44pct). In terms of expenses, the company's expenses rate for the total period of 23 years was 16.92%, yoy+0.02pct, of which sales, management, R&D, and financial expenses were 1.55%/5.50%/7.19%/2.68%, yoy+0.10pct/-0.19pct/-0.08pct/+0.18pct. In addition, the company accrued asset impairment losses of 10.9607 million yuan in 24Q1, causing a certain drag on net profit for the first quarter.

The company's P&S and SMC businesses maintained a high level of prosperity in '23. According to the company's annual report, the company's output of powder pressed products/soft magnetic composites/metal injection products in 2023 was 52,700 tons/27,400 tons/49,000 pieces, yoy +7.22%/17.74%/-7.78%, with revenue of 19.75/8.26/1,022 million yuan, yoy +8.51%/17.13%/-11.42%, respectively. The powder metallurgy and soft magnetic composites business benefited from high prosperity in the downstream automotive, photovoltaic and energy storage sectors and achieved rapid growth. The MIM technology platform was affected by the sluggish downstream market sentiment in the first half of '23, and production and revenue declined year-on-year. Looking ahead to the future market, the improvement in the global consumer electronics market in 24 is expected to gradually improve the company's MIM business. At the same time, demand in the fields of photovoltaics, new energy vehicles, and energy storage will continue to be strong in 24Q1. We expect the company's three major businesses to achieve simultaneous high growth in 24 years.

The company's SMC production capacity has reached 70,000 tons, and the industrial chain is being extended at an accelerated pace. The company is focusing on core business expansion, simultaneously speeding up the extension of the industrial chain and achieving integrated development to enhance the competitiveness of the company's industry. On the main business side, with the completion of Zhejiang Dongmu Keda Plant 3, the first phase of the Shanxi Magnetoelectric Company project was completed and put into operation. By the end of '23, the company's SMC production capacity had reached 70,000 tons/year. At the same time, the company actively lays out a new axial flux motor project, increased its shareholding in Shenzhen Xiaoxiang Electric Company through Ningbo Dongmu Guangtai Company, and plans to transform the axial magnetic flux motor assembly line at the Ningbo factory to achieve breakthroughs in the company's products into robotics and other fields.

Risk warning: Downstream demand in the industry fell short of expectations, and capacity expansion exceeded expectations.