The company released its three-quarter report for 2022. In the first three quarters, the company achieved revenue of 732 million yuan, +18.19% year-on-year, and net profit of 127 million yuan, or +83.14% year-on-year. Among them, Q3 revenue was 270 million yuan, +46.1% year on year, -3.7% month on month, net profit of 45 million yuan, +100.4% year on year, and -12.6% month on month. Performance was in line with expectations.
Downstream demand was weak, and prices of zirconium products rebounded somewhat in the third quarter. Affected by continued weakness in downstream demand, prices of major zirconium products declined by varying degrees in the second half of the year. Among them, the price of zirconium sand fell from a high point of 20,300 yuan/ton to 15,800 yuan/ton at present. The price of zirconia was also lowered from a high of 78,500 yuan/ton to 61,500 yuan/ton. Thanks to the continuous commencement of large-scale chemical projects related to zirconium applications, downstream demand for zirconium sponge has increased dramatically, and prices are relatively strong. However, due to the decline in the price of upstream zirconium sand, it has also dropped from a high point of 250,000 yuan/ton to 230,000 yuan/ton.
The new business continues to expand production volume and is expected to become a new driving force for performance growth. The company is a leading domestic fused zirconium enterprise. It has outstanding advantages in industrial chain collaboration. New businesses such as zirconium sponge and nano-zirconia are gradually expanding production volume. The zirconium oxychloride project with an annual output of 20,000 tons has now entered the planned production stage. The zirconium oxychloride project with an annual output of 20,000 tons has now entered the planned production stage. Liaoning Huaxiang has entered the small-scale production stage, but large-scale sales have not yet been formed. A production line for zirconia for lithium battery cathode materials has also been built. Currently, supplier reviews and production line reviews are being carried out in accordance with customer requirements. The foam ceramics project and the zirconia ceramic bead project have also completed expansion tests, and production lines are currently under construction.
The magnesium-aluminum alloy project is progressing smoothly, and is expected to contribute significantly in 23 years. The first phase of the Ningde Wenda Magnesium-Aluminum Project, which the company cooperates with enterprises such as Ningde Times and Wanshun Group, has already been completed and put into operation, but it is expected that at present, it is mainly invested in the early stages, and the production scale is relatively small. The company's investment loss in joint ventures and joint ventures increased to 6.7 million yuan in the first three quarters, and the investment loss in a single quarter was 3.53 million yuan, a significant increase from the first half of the year. We expect the company's magnesium-aluminum alloy project to expand production at an accelerated pace, and may be expected to contribute to a significant increase in performance in 23 years. Furthermore, Ningde Wenda's batch supply products at this stage are mainly battery end panels, etc. It is expected that future product expansion will be carried out in the direction of structural parts such as battery packs, trays, etc., and electric ships, etc., and development prospects in the field of light metal materials are promising.
According to the prices of zirconium products and the company's three-quarter report, we adjusted the relevant assumptions. We estimated that the company's net profit for 22-24 years would be 164 million yuan, 241 million yuan, and 310 million yuan respectively (the original 22-24 years were 170 million yuan, 243 million yuan, and 302 million yuan). Since the number of comparable companies is small, we adopted a historical valuation method, referring to the company's median value of PETTM over the past 5 years, and gave the company 39XPE in 2022. Maintaining the purchase rating, the corresponding target price was 21.13 million yuan.
Risk Reminder
Prices of raw materials fluctuated greatly, demand for new products fell short of expectations, new production capacity put into production fell short of expectations, etc.