\u3000\u3 China Vanke Co.Ltd(000002) 057 Sinosteel New Materials Co.Ltd(002057) )
Core view
Magnetic material + detection two wheel drive, the company’s performance continued to grow high. The company vigorously develops the two main business sectors of magnetic materials and inspection and testing. In addition, it is also involved in metal products, equipment manufacturing and organic chemical industry. In recent years, the company’s performance has increased significantly. In 2020, the operating revenue reached 1.672 billion yuan and the three-year CAGR reached 13.06%. The development plan of the 14th five year plan is clear. By 2025, the company will build three industrial clusters of more than 1 billion in permanent magnet ferrite business, rare earth permanent magnet business and soft magnetic business. The testing business will further expand the service scope and region, and is expected to grow into a first-class new material enterprise in the future.
Full license + national layout has laid the advantages of testing business, and the development potential of the third-party testing market is huge. The company’s testing business has developed rapidly and has become the only testing institution in the field of infrastructure engineering testing to achieve full license and national layout; In 2020, the testing revenue was 376 million, the CAGR reached 42.36%, and the gross profit margin remained above 50% all year round. The company continues to expand the scope of testing business and service area. The testing scope has covered many fields such as railway, highway and building materials, and has preliminarily established a national testing network. In 2020, the market scale of China’s testing and inspection industry has reached 358592 billion yuan, and the CAGR has reached 14.4%. There are 48919 testing and inspection institutions in total; Driven by policies, the marketization of the industry has accelerated, and testing enterprises have ushered in a period of development opportunities. In the context of steady growth, the acceleration of infrastructure investment will drive the rise of infrastructure testing demand. According to estimates, the testing demand of the construction industry is expected to exceed 90 billion in 2022; The railway and highway engineering inspection market will reach 16.16 billion and 30.8 billion respectively. If the company breaks through the market share, the corresponding revenue of railway and highway engineering inspection will reach 485 million and 616 million respectively.
The company is the leader of manganese trioxide, and its products can replace manganese dioxide for the production of lithium manganate. Manganese trioxide instead of manganese dioxide as lithium manganate battery material can greatly improve the electrochemical stability and cycle performance of the battery, and has a broad market space in the field of downstream electric bicycles and low-speed vehicles. The company is the world’s largest manufacturer of high-purity manganese trioxide, with an electronic grade and battery grade manganese trioxide production capacity of 45000 tons and 5000 tons respectively, and another 10000 tons of battery grade manganese trioxide reserve capacity. Since March, the price of electrolytic manganese, a raw material, has fallen sharply by about 60%, significantly reducing the production cost of manganese trioxide and the difficulty of promotion. The downstream application space of manganese trioxide may be opened, and the company is expected to usher in another performance growth point.
Soft magnet and permanent magnet go hand in hand, and the diversified layout is expected to help the leap forward development of performance, production and sales. The company is the only listed company with metal magnetic particle core, ferrite soft magnet, ferrite permanent magnet and rare earth permanent magnet at the same time. In recent years, the company’s capacity expansion has accelerated, and the capacity of rare earth permanent magnet has expanded from 500 tons to 2000 tons. Through fixed increase fund-raising, the company has invested in 15000 tons of soft magnetic ferrite, 20000 tons of permanent magnetic ferrite devices, 1000 tons of metal magnetic particle core and other projects. At present, the company has production capacity: 3000 tons of metal soft magnetic powder, 5000 tons of manganese zinc ferrite devices, 15000 tons of ferrite permanent magnet parts and 2000 tons of rare earth permanent magnet; Planned production capacity in 2025: 5000 tons of metal soft magnetic powder materials, 5000 tons of magnetic cores, 20000 tons of manganese zinc ferrite devices, 4 Tianma Microelectronics Co.Ltd(000050) 000 tons of ferrite permanent magnetic devices and 5000 tons of rare earth permanent magnets. The production capacity is expected to achieve leapfrog growth. With the rapid development of electric vehicles, energy-saving household appliances, communications and electronics industries, the demand pulling effect on magnetic materials and products is prominent. The diversified layout is expected to help the company double its magnetic material production capacity and performance in the future.
The implementation of equity incentive of the company and Baowu trusteeship are beneficial to the business development of the company. Taking advantage of the reform of state-owned enterprises, the company implemented the equity incentive scheme and granted a total of 12.86 million restricted shares to 143 incentive objects at the grant price of 4.15 yuan / share. Through equity incentive, the company further establishes incentive and restraint mechanism to mobilize the enthusiasm of managers and core employees; At the same time, the 18% top grid profit growth assessment index also shows the company’s management’s confidence in future performance growth. 2022 is the closing year of the “three-year action of state-owned enterprise reform”, and the reorganization of Baowu Sinosteel is expected to usher in substantive progress. If the reorganization progresses smoothly, the cooperation between the two sides is expected to achieve common development in the cross business of testing and magnetic materials. In addition, the output of Baowu high-quality iron red accounts for nearly 50% of the country, and it is expected to solve the problem of raw material supply of the company in the future; The output of Baowu silicon steel is leading in the country, and it has rich resources in the downstream application market of magnetic materials, which is expected to promote the promotion and application of the company’s magnetic products.
Investment suggestion: the company has been deeply engaged in the field of magnetic materials and testing for many years, and has become the only infrastructure engineering testing institution with full license and nationwide layout in China; In addition, the company also distributes soft magnetic, ferrite permanent magnet and rare earth permanent magnet, which is still the absolute leader of manganese trioxide, and the production capacity of magnetic materials will be accelerated; At the same time, the implementation of equity incentive and the controlling shareholders of Baowu trusteeship company have added vitality to the development of the company. The operating revenue of the company is expected to reach RMB 2.584 billion, RMB 3.232 billion and RMB 4.029 billion from 2021 to 2023, and the net profit attributable to the parent company will reach RMB 214 million, RMB 287 million and RMB 365 million respectively, and the EPS will be 0.29, 0.38 and 0.49 respectively. For the first time, give a “buy” rating.
Risk tip: the production capacity of magnetic materials is less than expected, the downstream demand is less than expected, and the price rise of raw materials is less than expected. The growth of testing business is less than expected
