Amorphous alloys: Domestic demand for distribution transformers is booming, demand is growing in Southeast Asia, European and American penetration rates are broad, and amorphous motors are opening up new applications. As a high-performance soft magnetic material, amorphous alloys are mainly used in distribution transformers. Compared with traditional silicon steel, amorphous transformers have the advantage of high efficiency and energy efficiency, and have broad application space under the rise of low-load power scenarios; at the same time, amorphous motors have power density advantages, which are expected to open up new application scenarios for automobiles and low-altitude flight. (1) Domestic: Amorphous alloy transformers have gone through a period of downward adjustment. Currently, they have ushered in a resounding upward period of technological breakthroughs and policy guidelines, and the product penetration rate is reversing at the bottom. (2) Southeast Asia: Demand continues to grow, with strong demand from South Korea, India, and Vietnam, all of which are the company's key overseas expansion directions. (3) Europe and America: Demand for distribution transformers in the US is high, and amorphous accounts for a low proportion. Driven by relevant standard policies, it is expected to open up space for penetration rates.
Amorphous alloys: The industry's largest supplier of amorphous alloy thin strips, and the share of overseas markets continues to increase. In terms of production capacity, the company's annual design capacity reached 0.09 million tons (the largest supplier of amorphous alloy thin strips in the industry), and product sales increased from 0.052 million tons in 2021 to 0.087 million tons in 2023. In terms of overseas sales, the company's overseas revenue increased from 0.32 billion yuan in 2021 to 0.73 billion yuan in 2023, while the share of overseas revenue increased from 34% to 41%.
Nanocrystalline alloys: excellent solutions for high-frequency miniaturization components, wireless charging and new energy sources open up incremental space. Nanocrystalline strips are widely used in energy transmission and filtering in medium and high frequency fields. Terminal products are transformers, electronic transformers, common mode inductors, etc. Compared with traditional ferrite soft magnets, nanocrystalline strips can achieve advantages such as reducing volume and loss. Against the backdrop of industrial upgrading and the increasing performance requirements of magnetic materials and resonating with emerging industries such as new energy vehicles, nanocrystalline ultra-thin strips are expected to gradually replace traditional ferrite. The sales volume of the company's related products increased steadily from 4,567 tons in 2021 to 5060 tons in 2023.
Soft magnetic powder core: the core material for new energy power generation, continues to be high. Soft magnetic powder cores are the core materials for power inductors, and stand on popular circuits such as photovoltaic storage, new energy storage and charging piles. According to our estimates, the global alloy soft magnetic powder core market space is expected to reach 45.9/6.56/8.27/10.01 billion yuan in 2022, with a 3-year CAGR of 29.7%. The sales volume of the company's related products increased rapidly from 4120 tons in 2021 to 7266 tons in 2023.
Profit forecast and valuation: We predict that the company's net profit for 2024-2026 will be 0.356/0.409/0.529 billion yuan, respectively, corresponding to the closing price of July 26, 2024, and the PE valuation will be 22/19/15x. We selected Platco New Materials and Shenma Electric Power as comparable companies. According to Wind's unanimous expectations, the average PE of comparable companies in 2024-2026 was 32/23/18x, respectively. The company's amorphous alloys continue to benefit from the distribution transformer boom. Nanocrystalline alloys+soft magnetic powder cores have opened up new growth, covered for the first time, and given a “buy” rating.
Risk warning: risk of demand fluctuations; risk of project construction falling short of expectations; risk of fluctuations in raw materials; risk of new business expansion falling short of expectations; risk of deviations in market space estimation.