Core conclusion: We expect Yunlu Co., Ltd. to achieve net profit of 0.379/0.446/0.535 billion yuan in 2024-2026, an increase of 14.1%/17.9%/19.9% year-on-year, giving 23 times PE in 2024, corresponding to a target price of 72.60 yuan. Covered for the first time, a “gain” rating was given.
Amorphous alloy transformers are back on the path of advancement. Their energy saving advantages are outstanding, and there is still room for a boom in demand. Transformers made of amorphous alloys have nearly 60% lower no-load loss than silicon steel transformers. In 2017-2021, the penetration rate of amorphous alloy transformers experienced a round of decline due to flat core defects; after three-dimensional core design optimization, the penetration rate of amorphous alloy transformers increased again after 2022. The “Action Plan for Energy Conservation and Carbon Reduction” requires that the share of transformers with energy efficiency level 2 or above continue to increase by 10% from 2024-2025. The energy saving advantages of amorphous alloy transformers are catalyzed by policies, and the penetration rate is expected to continue to grow. At the same time, repairing shortcomings in overseas power grids is still progressing. The company's overseas revenue accounted for 41% in 2023, and it is expected that it will continue to benefit.
More than benefiting from external drivers, the company's excellent competitiveness cannot be ignored. The company achieved a rise in share during a period of headwinds in demand, creating an advantageous position; in the trend of amorphous alloy transformers rebounding in the past two years, the company's gross margin continued to rise, with a cumulative increase of 6.48 pcts in 2023 compared to 2018, demonstrating excellent competitiveness. Process autonomy and equipment support solutions are the only magic weapon for new materials companies to gain competitive advantage. Yunlu's 10,000-ton amorphous strip continuous casting production line and extremely high yield build cost barriers. The company is expected to continue to rely on material development capabilities, equipment implementation capabilities, and application expansion capabilities to replicate the outstanding competitiveness of amorphous strips and create new growth poles.
Based on the advantages of magnetic properties of materials, application expansion and business growth will only take time. Amorphous nanocrystals have outstanding advantages in high-speed and high-frequency applications, and are expected to expand application scenarios in line with the trend of higher frequency electronic components. This year is the first year of mass production of nanocrystalline stator motors for new energy vehicles. The GAC Ruipai mass-produced motor model M25 has a power density of 12 kW/kg, breaking through the boundaries of traditional motors and expanding the industry's prospects with new application scenarios. The magnetic powder business caught up later, extended processing capabilities to the downstream magnetic powder core field, expanded the value chain, and simultaneously expanded high-value scenarios for new energy sources other than home appliances. Growth prospects are promising.
Risk warning: industry demand risk; technology route risk; raw material price risk; exchange rate risk.