occurrences

The company released its 2022 annual report on the evening of March 31. It achieved revenue of 928 million yuan in 2022, an increase of 15.3%; realized net profit of 105 million yuan, a decrease of 19.76%; deducted non-net profit of 86 million yuan, a decrease of 29.52%; and achieved EPS of 0.88 yuan, a decrease of 52.43%.

reviews

Q4 Increased costs and expenses affected profits, and performance fell slightly short of expectations. Q4 The company's net profit was 18 million yuan, down 34.53% from the same period; gross profit margin was 21.38%, down 7 pcts. Affected by the epidemic, Q4's unit fuel costs and labor costs increased significantly; management expenses increased 45% and R&D expenses increased 28% throughout the year; the soft magnetic subsidiary Dragon Magnetic Metal had a net loss of 14.5 million yuan. A number of factors caused Q4 performance to fall slightly short of expectations. In '22, the company achieved sales of 33,400 tons of permanent magnetic wet-pressure tiles, an increase of 16%, and production capacity has expanded to 40,000 tons/year.

Permanent magnet production capacity has increased steadily, and soft magnets are expected to contribute to profits. The company's wet magnetic tile production capacity is scheduled to reach 50,000 tons/year by the end of the year and 60,000 tons/year by the end of the year 24, which is expected to account for 10% of the global share. The company's soft magnetic project is committed to building a “magnetic powder-core-inductor” integrated industrial chain. The production capacity of the metallic magnetic powder core is 5,000 tons/year, and major photovoltaic customers are still in the certification stage; the soft magnetic ferrite production capacity is 6,000 tons/year, and product certification tests are being carried out simultaneously; the first phase of automotive and photovoltaic wire-wound inductors has reached 12 million units/year, the second phase has started, and is expected to be put into operation in the second half of 23; the integrated molded inductor industry has built two automated production lines, and production capacity is expected to start in the second half of 23; the integrated molded inductor industry has built two automated production lines, and production capacity is expected to be put into operation in the second half of the year 23. Depending on the progress of customer development, the soft magnetic inductor industry has built two automated production lines. Production capacity for major photovoltaic customers is still in the certification stage; soft magnetic ferrite production capacity is expected to be put into operation this year.

Holding Envo's layout was slightly reversed, creating complementary industrial advantages. In December '22, the company acquired 51.43% of Envo New Energy's shares for 180 million dollars. It is expected that it will be officially included in consolidated statements starting in '23. Envo Renewable Energy is mainly engaged in the microinverter business in the European market. In '22, it shipped 150,000 to 160,000 units. Its products are mainly a 300W, 360W, and a drag of two 560W and 720W. It is mainly sold to European and American countries such as Portugal, Austria, Germany, Switzerland, Colombia, etc., and production capacity is expected to expand to 600,000 units in 23, continuing to develop the US market. The value of this soft magnetic product accounts for about 10% of the total cost of micro inverters. The company's soft magnetic ferrite can be used in Envo's micro inverters. The industrial chain is further extended to the application side to improve the company's industrial layout in the new energy field. At the same time, after the merger and acquisition is completed, it is more conducive to the formation of a competitive advantage in cost for Envo series products and achieving a strategic win-win situation for both parties.

Profit Forecast & Investment Advice

According to the progress of the company's soft magnetic business, the company's net profit attributable to the mother in 23-24 was lowered by 10% and 3% respectively. The company's net profit of 23-25 is estimated to be 201 million yuan, 287 million yuan, and 404 million yuan respectively. The corresponding EPS is 1.67 yuan, 2.39 yuan, and 3.36 yuan respectively, and the corresponding PE is 21.2 times, 14.9 times, and 10.6 times respectively to maintain the “buy” rating.

Risk warning

Downstream demand falls short of expectations; new product development falls short of expectations, etc.