Profits are stable in 2019 compared with the same period last year
The company announced its 2019 results: operating income was 600 million yuan, up 0.6% from the same period last year; net profit returned to its mother was 150 million yuan, corresponding to 0.46 yuan per share, down 6% from the same period last year, which remained stable compared with the same period last year, in line with KuaiBao's performance. 4Q19's operating income is 160 million yuan, + 15% / month-on-month + 6% compared with the same period last year, and the net profit is 37 million yuan-4% compared with the same period last year. The company plans to pay a dividend of 113 million yuan in 2019, corresponding to 0.35 yuan per share, with a dividend rate of 76.7%, up 4.4ppt from a year earlier, and the current stock price implied dividend yield of 2.4%. Comments:
Production and sales increased and gross profit margin decreased. In 2019, the company's production and sales of rare earth permanent magnets were 2096 tons and 2030 tons respectively, up 8% and 5.4% from the same period last year. However, the company's overall gross profit margin (gross margin not deducted from tax and additional) decreased by 1.4ppt to 34.4%, and the gross margin of bonded NdFeB magnets decreased by 1.6ppt to 34.2%. In addition, the average domestic price of praseodymium and neodymium oxide in 2019 was 305,000 yuan / ton, down 7% from the same period last year.
Balance sheet is healthy and cash flow is strong. As of 4Q19, the company's asset-liability ratio is 6%, net cash is 690 million yuan, accounting for 54% of the total equity, and the balance sheet continues to be sound. In 2019, the financial expenses were-23 million yuan, down 11 million yuan from the same period last year, and the operating cash flow was 140 million yuan, up 18% from the same period last year.
Trend of development
Affected by the epidemic, 1Q20 profits declined compared with the same period last year. The company predicted that 1Q20 made a profit of 2600-29.7 million yuan, down 20% MUR 30% from the same period last year, mainly due to factors such as the extension of the Spring Festival holiday caused by the epidemic and the fact that some customers downstream have not yet fully returned to work and production.
The new project is expected to be put into production by the end of 2020, creating a profit growth point for the company. By the end of 2016, the company plans to invest 300 million yuan to build an annual production capacity of 1000 tons of hot-pressed NdFeB magnet project and 500 tons of samarium cobalt magnet project. By the end of 2019, the main project of the project plant has been completed, and the company will strive to put it into use by the end of 2020.
Rare earth prices lack upward momentum. Over the next 1-2 years, there will be an increase in overseas light rare earth mining and smelting separation capacity, but the slowdown in global economic momentum may affect rare earth demand growth expectations, and we expect rare earth prices to lack upward momentum, which may have an impact on the company's gross profit scale.
Profit forecast and valuation
We maintain the profit forecast of 140 million yuan in 2020 and introduce a profit forecast of 170 million yuan in 2021. The current share price corresponds to a price-to-earnings ratio of 33.3 times 2021 / 27.3 times earnings. Maintain a neutral rating and a target price of 15.00 yuan, corresponding to 34.4 times 2020 price-to-earnings ratio and 28.1 times 2021 price-to-earnings ratio, which has 3.2% upside compared to the current stock price.
Risk.
The progress of the project was not as expected, and the gross profit margin of magnetic products fell sharply.