\u3000\u30 China Baoan Group Co.Ltd(000009) 70 Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) )
Core view:
The annual operating income of the company was 6 billion yuan, with a year-on-year increase of 6 ; The net profit attributable to the shareholders of the parent company was 399 million yuan, a year-on-year increase of 208.44%; The net profit deducted from non parent company was 377 million yuan, with a year-on-year increase of 241.63%. In 2021q4, the company realized an operating revenue of 2.235 billion yuan, a year-on-year increase of 34.35%; The net profit attributable to the parent company was 193 million yuan, an increase of 189.95% year-on-year, the best performance in a single quarter since 2013.
Benefiting from the high boom in the downstream new energy field and the booming production and sales of magnetic materials, the performance increased. In 2021, the company’s sales revenue of magnetic products was 6.961 billion yuan, a year-on-year increase of 57.22%. The high boom of downstream new energy vehicles, frequency conversion household appliances, energy-saving elevators and wind power generation has driven the sharp growth of the demand for rare earth permanent magnet materials, which has greatly increased the orders of the company’s magnetic products during the reporting period. The subordinate factories are close to full load operation, and the capacity utilization rate and production and sales volume have increased significantly. Only in the first half of 2021, the company’s blank output and finished product sales volume of magnetic materials have reached 69% and 62% of 2020 respectively. In addition, benefiting from the booming downstream demand for permanent magnet materials and the rising cost of rare earth prices in the upstream, Baichuan Yingfu statistics that the average price of sintered NdFeB H35 blank in China reached 227 yuan / kg in 2021, up 54.7% year-on-year. The rise in the price of NdFeB products, combined with the improvement of the company’s product structure and the increase in the proportion of high-end magnetic materials used in the field of new energy, as well as the batch and wide application of heavy rare earth reduction technologies such as grain boundary diffusion, grain refinement and grain boundary regulation, so as to reduce the consumption of Terbium and dysprosium, so as to reduce the cost of raw materials, so that the gross profit margin of the company’s magnetic products will reach 15.42% in 2021, with a year-on-year increase of 2.55 percentage points, and the profitability will be significantly enhanced.
Expand production, improve performance flexibility, and ensure the supply of raw materials through resource side layout. The company is a leading enterprise of high-performance Nd-Fe-B in China, with a total production capacity of 21500 tons / year. In February this year, the company received 677 million yuan of subscription for the allotment and issuance of shares. The raised funds are intended to be used for the new construction and technical transformation project of Ningbo keningda base (the new production capacity of sintered Nd-Fe-B magnet alloy is 3262.5 tons) and the new construction project of Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) Ganzhou base (the new production capacity of sintered Nd-Fe-B is 5000 tons). The company plans to expand the production capacity of 10000 tons of sintered NdFeB blank this year. It is expected to complete the expansion by the end of 2022 or the beginning of 2023. At that time, it will have the production capacity of 30000 tons of sintered NdFeB blank and 1500 tons of bonded NdFeB blank, with a total production capacity of 31500 tons. On this basis, the company also has the ability to expand the capacity of sintered NdFeB to 51000 tons by the end of 2024. If the market and orders continue to improve, the company is expected to continue to expand its capacity and form a continuous driving force for future performance. The company continued to distribute upstream resources by participating in Jiangxi southern high technology and Ganzhou Keli rare earth, signing a strategic agreement with Minmetals Nonferrous Metals, and establishing Ganzhou joint venture with southern rare earth, so as to ensure the supply of raw materials and alleviate the impact of price fluctuations on costs.
Investment suggestion: under the background of “double carbon”, the demand for medium and high-end Nd-Fe-B in application fields such as new energy vehicles, wind power generation and industrial motors continues to be strong. SMM data show that since this year, large magnetic material enterprises have had sufficient overseas orders. From January to February 2022, China’s rare earth permanent magnet exports were 8500 tons, with a year-on-year increase of 18%. The global demand for high-performance NdFeB products may continue to strengthen in 2022 Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) as a leading permanent magnet enterprise, it is expected to continue to benefit from the high growth of downstream demand, and capacity expansion is conducive to the continued release of performance elasticity. It is estimated that the company’s net profit attributable to shareholders of listed companies from 2022 to 2023 will be 583 million yuan and 827 million yuan, corresponding to EPS of 0.48 and 0.68 yuan from 2022 to 2023 and PE of 26x and 18x from 2022 to 2023, maintaining the “recommended” rating.
Risk tip: the downstream demand is less than expected, the price of raw materials fluctuates sharply, and the progress of the company’s new projects is less than expected.
