The company released its 2024 three-quarter report

The company's revenue for the first three quarters of 2024 was 5.014 billion yuan, or -0.72% year-on-year, achieving net profit of 0.197 billion yuan, or -60.17% year-on-year, after deducting non-attributable net profit of 0.089 billion yuan, or -79.63% year-on-year.

Among them, 2024Q3 revenue was 1.653 billion yuan, +1.99% YoY, -9.46%; net profit attributable to mother was 0.077 billion yuan, -52.24% YoY and +328.89% month-on-month; net profit without return to mother was 0.055 billion yuan, -63.25% YoY and +487.23% month-on-month.

The company's production and sales volume increased by about 40% year on year, and gross margin improved month-on-month

Production and sales volume: In the first three quarters of 2024, the company relied on sufficient on-hand orders to actively increase its market share. The production and sales volume of high-performance magnetic products increased by about 40% year-on-year.

Price: In the first three quarters of 2024, the average price of praseodymium metal (tax included) was 0.4752 million/ton, -28.69% year-on-year.

Gross profit margin: 2024Q3, the company's gross sales margin was 12.81%, +5.31pct month-on-month. The company continues to invest in R&D, actively lays out the field of magnets and magnetic components for humanoid robots, accelerates the informatization and automation of production management, reduces costs and increases efficiency. In addition, price-locked orders signed by individual customers when the prices of rare earth raw materials are relatively high have already been partially implemented, and the company's profitability has improved.

The capacity utilization rate exceeds 90%, and the plan is to build 0.04 million tons of production capacity in 25 years

Capacity utilization rate: The company's capacity utilization rate continued to exceed 90% in the first three quarters of 2024.

Magnetic material production capacity planning: The company currently has an annual rough production capacity of 0.023 million tons (Baotou 0.008 million tons+Ganzhou 0.015 million tons). The Baotou Phase II 12000 tons/year production capacity project, the Ningbo 3,000 tons/year high-end magnetic materials and 0.1 billion bench module production capacity project, and the Ganzhou high-efficiency and energy-saving motor magnetic material base project are under construction according to plan. It is planned to build 0.04 million tons of high-performance rare earth permanent magnet material production capacity and an advanced magnetic component production line by 2025.

Investment advice:

The estimated revenue for 2024-2026 is 6.343, 7.709, 9.1 billion yuan, and net profit is 0.34, 0.828, and 0.955 billion yuan, and the corresponding EPS is 0.25, 0.62, and 0.71 yuan/share, respectively. Currently, the corresponding PE price is 66.1, 27.1, and 23.5 times. Since 2024 results are affected by many non-recurring factors such as customer order execution and rising costs due to investment in production capacity, the 2025 EPS was selected as the basis for valuation. Maintaining a “buy-A” rating, the target price for 12 months is 17 yuan/share, corresponding to about 27 times PE in 25 years.

Risk warning: demand falls short of expectations, prices of rare earth raw materials fluctuate greatly, and project progress falls short of expectations