On the evening of April 24, Baowu Magnesium (002182.SZ) released its first annual report after officially belonging to the "Baowu Department". According to the content of the annual report, Baowu Magnesium will achieve revenue of about 7.652 billion yuan in 2023, a year-on-year decrease of 15.96%, a corresponding net profit attributable to the parent company of about 306 million yuan, a year-on-year decrease of 49.82%, and basic earnings per share of 0.46 yuan, a year-on-year decrease of 51.38%.
Regarding the decline in performance, Baowu Magnesium said that due to the decline in the sales price of the company's products, the gross profit margin declined, resulting in a year-on-year decline in performance.
Baowu Magnesium is a high-tech enterprise integrating mining, non-ferrous metal materials and deep-processing products, the main business is the production and deep processing of magnesium and aluminum alloy materials, the main products include magnesium alloy, magnesium alloy deep-processing products, aluminum alloy, aluminum alloy deep-processing products, intermediate alloys and strontium metal.
In terms of products, the sales scale of the company's main categories of products generally declined. The revenue of magnesium alloy products was 2.528 billion yuan, down 23.58% year-on-year, the revenue of magnesium alloy deep-processing products was 1.055 billion yuan, down 0.99% year-on-year, and the revenue of aluminum alloy products was 1.051 billion yuan, down 48.2% year-on-year, but the revenue of aluminum alloy deep-processing products performed well, with a year-on-year increase of 31.86% to 1.833 billion yuan.
However, the overall profit margin of its products is under pressure, and the gross profit margin of sales in 2023 will be 13.44%, a year-on-year decrease of 16.47%. Among them, the gross profit margin of magnesium alloy products fell the most, down 11.06% to 18.08%. The gross profit margins of magnesium alloy deep-processed products, aluminum alloy products and aluminum alloy deep-processed products were 12.37%, 6.29% and 10.27% respectively, with an increase of 4.38%, 4.71% and 0.05% respectively.
Guosen Securities (002736. SZ) research report analysis said that the company's earnings fluctuations are mainly due to large fluctuations in magnesium prices. The company has a primary magnesium smelting capacity of 100,000 tons, and its profits mainly come from primary magnesium smelting, and its profitability is highly dependent on magnesium prices.
According to the 2023 annual magnesium market price data released by Shang Magnesium Network, the price of magnesium ingots in China will generally decline and fluctuate in the low range in 2023, from 21,600 yuan/ton at the beginning of the year to 20,200 yuan/ton at the end of the year, and 20,000 yuan has become an important support line. Magnesium prices at the end of 2023 have fallen back to July 2021 levels, the lowest in 32 months. The average price for the whole year of 2023 will be 21,953 yuan/ton, a year-on-year decrease of 27.5% and the lowest value in three years.
Although magnesium prices are still falling since 2024, the company's performance has picked up. According to the quarterly report disclosed at the same time, in the first quarter of 2024, Baowu Magnesium achieved operating income of 1.864 billion yuan, a year-on-year increase of 10.03%, and net profit attributable to the parent company of 60.7193 million yuan, a year-on-year increase of 19.94%.
Baowu Magnesium has formed a complete industrial chain of "dolomite mining-primary magnesium smelting-magnesium alloy casting-magnesium alloy processing-magnesium alloy recycling", and is a leading magnesium alloy enterprise in the world.
At the same time of layout integration, capacity expansion is also gradually advancing. The subsidiaries Chaohu Yunhai and Anhui Baomei dolomite are self-sufficient, Chaohu Yunhai has the mining rights of 88,642,500 tons of dolomite, and Anhui Baomei has the mining rights of 1,319,781,300 tons of dolomite. Wutai Yunhai owns 578.95 million tons of dolomite mines, and the mining rights are still being processed.
Baowu Magnesium currently has a production capacity of 100,000 tons of primary magnesium and 200,000 tons of magnesium alloy, and has built a new production capacity of 50,000 tons of primary magnesium in Chaohu, 100,000 tons of primary magnesium and 100,000 tons of magnesium alloy in Wutai, and 300,000 tons of primary magnesium and 300,000 tons of magnesium alloy in Qingyang.
Baowu Magnesium was formerly known as Nanjing Yunhai Special Metal Co., Ltd. (hereinafter referred to as "Yunhai Metal"). Baosteel Metal, a subsidiary of China Baowu, took a stake in Yunhai Metal at the end of 2018, and later became the company's new controlling shareholder through private placement in 2023, and the actual controller was changed from Mei Xiaoming to the State-owned Assets Supervision and Administration Commission of the State Council. In September 2023, the company's name was changed to "Baowu Magnesium Technology Co., Ltd.", and the stock abbreviation was changed from "Yunhai Metal" to "Baowu Magnesium".
Behind the strategic investment in Baowu Magnesium is that Baosteel Metal, a leading Chinese automotive steel company, has further consolidated its position in the automotive supply chain by entering the magnesium and aluminum industry. Baowu Magnesium also mentioned that after cooperating with Baosteel Metal, China Baowu has international market resources, relying on China Baowu's strong automotive market background, which can further accelerate the penetration of the company's products in the field of automotive lightweight.
According to the annual report, in June 2023, the company successfully trial-produced magnesium alloy ultra-large automotive die-casting structural parts, including two types of ultra-large new energy vehicle structural parts such as integrated body castings and battery box covers, with a projection area of more than 2.2 square meters, which is 32% less than that of aluminum substrates. In March 2024, the subsidiary, Boao Magnesium Aluminum, signed a development agreement with an automobile manufacturer for ultra-large magnesium alloy integrated die castings to jointly develop ultra-large magnesium alloy integrated die castings.
Baowu Magnesium also disclosed that it had signed a cooperation agreement with Xpeng Flying Motors to become a designated supplier of key components such as the instrument panel tube beam assembly and the left and right lower bracket assemblies in the middle channel. In addition, Baowu Magnesium said that the company is a secondary supplier of Xiaomi, providing aluminum alloy automotive extrusion parts (such as control arms, etc.) for forging extrusion rods and automotive air conditioning micro-channel flat pipes for Xiaomi SU7, and providing the rear seat bracket beam of the M7, which can not only greatly reduce the weight of the body, but also has the effect of sound insulation, noise reduction and shock absorption.
In the secondary market, Baowu Magnesium opened low and went high today, closing at 18.12 yuan as of noon, up 3.6%, with a total market value of 12.8 billion yuan. (This article was first published in Titanium Media APP, author: Lu Wenyan)