Annual report performance: In '23, the company achieved revenue of 368 million yuan, yoy -13.8%; net profit to mother of 80 million yuan, yoy -19.1%; deducted non-net profit of 73 million yuan, yoy -15.4%. Among them, Q4 achieved revenue of 100 million yuan, yoy +19.2%, +12.2% month-on-month; net profit to mother was 121 million yuan, yoy +6.2%, or -1.7% month-on-month.

The profitability of carbonyl iron powder increased year-on-year, and the volume and price of soft magnetic powder & MIM feed rose sharply on the revenue side: carbonyl iron powder/atomized alloy powder/soft magnetic powder/MIM feed achieved revenue of 1.15/0.41/1.29/ 55 million yuan respectively in 23, yoy -4.3%/-69.8%/+8.1%/+64.5%. If you break it down, the amount:

The sales volume of the above products was 2651/683/2497/896t, yoy -9.8%/-5.6%/+48.3%, with significant MIM feed starting; price: We calculated that the average sales unit price of the above products was 4.3/6.0/5.1/620,000 yuan/ton, yoy +6%/-68%/+2.9%/+11%, and the price of atomized alloy powder dropped sharply, mainly due to the pressure transmission of consumer electronics to upstream, and the shift in shipment from high-end cobalt-chromium powder to low-end iron powder. Overall, the decline in the company's revenue in '23 was mainly affected by changes in the shipping structure of atomized alloy powder. At the same time, soft magnetic powder and MIM feed, deep-processing products welcomed a sharp rise in volume and price. MIM feed was driven by the 3C sector to increase sales by up to 64.6%, reducing the impact of the decline in some atomized alloy powders.

Profit side: The gross margin of carbonyl iron powder/atomized alloy powder/soft magnetic powder/MIM feed was 49.7%/16.9%/47.4%/22.3%, yoy+3pct/-3.4pct/+3.9pct/+2.5pct, respectively. Thanks to carbonyl iron powder maintaining high profitability, the company's comprehensive gross margin reached 39% in 23, yoy+4.9pct. Affected by period expenses, asset impairment, etc., the net profit margin was 21.4%, yoy-pc1.9t.

The product structure continues to be optimized to continue to benefit from the transmission of high downstream prosperity

In the consumer electronics sector, demand for high-strength steel and lightweight steel materials for precision parts such as folding screen hinges is growing rapidly. The company has developed high-strength steel powder and MIM feeders, which have been used in many mobile phone brands, and is expected to accelerate release in 24 years; in the field of electronic components, the company continues to increase investment in soft magnetic materials, and has developed various new products such as ultrafine powders, amorphous powders and composites, which are expected to continue to benefit from the rapid development trend of 5G communication, AI computing power, automotive electronics and other industries, and there is plenty of room for growth.

Production capacity has been planted for 23 years, and 24-year results are expected to be realized at an accelerated pace

The company's IPO raised 6,000 tons of iron carbonyl powder project at the end of the 3rd quarter of '23. It is currently in the trial production stage, and production capacity can be gradually released according to market demand. Without considering new projects, the production capacity of carbonyl iron powder will double from 5,500 tons to 11,500 tons after raising capital; at the same time, 4,000 tons of high-performance powder production capacity will be added, including 2,000 tons of soft magnetic powder for powder cores. The commissioning of the fund-raising project will help the company break through production capacity bottlenecks and focus on optimizing the product structure at the middle and high-end. The scale effect will also be highlighted, and the company's performance growth will continue to be promoted. Looking ahead, the production capacity of the 10wt new process project at the Ningxia base has been released one after another. After delivery, it is expected to achieve annual sales revenue of 3.423 billion yuan and net profit of about 593 million yuan, opening up room for growth.

Investment advice: As a leader in carbonyl iron powder, the company's new business expansion, new product development, new process expansion, and new production capacity release, the company's net profit for 2024-2026 is expected to be 1.11/1.50/203 million yuan, respectively (the value was 1.61/208 billion yuan before 24/25, considering the company's production capacity climbing pace and lowering the profit forecast), corresponding to the current stock price 28/21/15 times, maintaining a “buy” rating.

Risk warning: risk of demand fluctuations; risk of new project construction falling short of expectations; risk of fluctuations in raw materials; risk of process technology innovation; risk of new business development falling short of expectations.