\u3000\u3 China Vanke Co.Ltd(000002) 057 Sinosteel New Materials Co.Ltd(002057) )
With the development of both testing and magnetic materials, the performance is expected to meet high growth. The company is a subsidiary of Sinosteel group, mainly engaged in the production and sales of metal materials, inspection and testing, and magnetic materials. From 2019 to 2021, the revenue will reach 1.38/16.7/2.59 billion yuan, and the CAGR will reach 23.3%; The net profit attributable to the parent company was 140 / 170 / 210 million yuan, with a CAGR of 15.7%. The company's development plan for the 14th five year plan is clear. Its testing business has a good market-oriented mechanism. The magnetic material business benefits from the outbreak of industrial demand and is expected to maintain high growth rate in the future.
It has been deeply cultivated for more than 30 years and seeks all-round development. Zhengzhou metal products research institute under the company is the first batch of third-party inspection institutions approved by AQSIQ. It has a history of more than 30 years and complete qualifications, and is deeply engaged in the field of railway engineering. Under the employee stock ownership incentive mechanism, the revenue of testing services in 20172020 achieved cagr42.5% 0%, and contribute to the main profit source of the company (the gross profit of testing business accounted for 44.8% in 2020). The company has excellent management and stable gross profit margin of more than 50%, leading its peers. Looking forward to the future, the company's business layout across the country, and the market share of railway inspection is expected to continue to increase; At the same time, the company has actively expanded non-ferrous business in infrastructure fields such as roads and bridges through mergers and acquisitions in recent two years, which is expected to continue to create business growth points.
Benefiting from carbon neutralization, the demand for magnetic materials welcomes explosive growth. By 2021, the company has a production capacity of 50000 tons of manganese trioxide (the largest in China), 15000 tons of permanent magnet devices and 15000 tons of rare earth permanent magnet devices. The company plans to vigorously develop the magnetic material business in the 14th five year plan. Now it plans to expand the production capacity of permanent magnet devices to 34000 tons, rare earth permanent magnets to 5000 tons, and add 15000 tons of soft ferrite. We believe that (1) under the background of carbon neutralization, the demand for magnetic materials in traditional household appliances, new energy vehicles and wind power is rising rapidly. It is estimated that the consumption of high-performance NdFeB permanent magnet in China will reach 87000 tons and cagr16.5 million tons in 2025 6%； The industry space of soft ferrite is expected to reach 14.9 billion in 2025, and the CAGR will reach 11.9% in five years. (2) The company is a national high-tech enterprise transformed by scientific research institutes, with strong R & D strength, and the R & D rate ranks in the forefront of the industry, up to 5.7% in 2020.
Pioneer of market-oriented reform, equity incentive is deeply bound to the interests of employees. Adhering to market-oriented reform, the company has cultivated a group of enterprising and energetic management and technicians. At the beginning of 2020, it was selected as the "demonstration enterprise of scientific and technological reform" in the reform of state-owned assets; In April 2021, Sinosteel national inspection, a subordinate inspection subsidiary, completed the mixed reform, with employee stock ownership accounting for 3.1%; In September of the same year, the company proposed equity incentive and planned to grant 13.28 million stock options to 148 people at the price of 4.15 yuan / share. The interests of employees are deeply bound with the interests of the company, which promotes the rapid development of the company.
Profit forecast: it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 210 / 3.1 / 420 million respectively, the corresponding EPS will be RMB 0.28/0.41/0.56, and the corresponding PE will be 29.6/20.3/15.0x. The company's valuation is lower than the average value of comparable companies of testing and magnetic materials. The company has a good incentive system for testing business, and the magnetic material business enjoys the growth of the industry. It is expected to maintain high revenue and profit growth in the future, and is rated as "buy".
Risk tips: the downstream demand growth of magnetic materials is less than expected, the expansion of testing business is less than expected, the price fluctuation risk of raw materials, the risk of assumptions and calculation errors, etc.
