Jinli Permanent Magnet: Affected by the continued decline in the price of rare earth raw materials, net profit in the first quarter fell by 42.93% year-on-year, and the capacity utilization rate in the first quarter exceeded 90%
Jinli Permanent Magnet recently said at the performance briefing that in the first quarter of 2024, the company's new production capacity will be gradually released, and the capacity utilization rate will exceed 90%. The second phase of Baotou 12,000 tons/year production capacity project, Ningbo 3,000 tons/year high-end magnetic materials and 100 million sets of module production capacity project, and Ganzhou high-efficiency and energy-saving motor magnetic base project are under construction as planned, and it is expected that a 38,000 tons/year blank production line will be built by the end of 2024. It is planned to build a production capacity of 40,000 tons of high-performance rare earth permanent magnet materials and an advanced magnetic component production line by 2025.
The content of the performance briefing recently announced by JLMG is as follows:
1. What is the company's performance in the first quarter of 2024? JLMG responded: In the first quarter of 2024, the company worked hard to overcome the adverse factors of the continued decline in the price of rare earth raw materials and the intensification of competition in the industry. The company has sufficient orders in hand, new projects have been gradually implemented, production capacity has been steadily increased, the company's production management informatization and automation have been accelerated, the company's ESG construction has been strengthened, and the business in emerging fields such as humanoid robots has been actively expanded. In the first quarter of 2024, the company achieved operating income of 1.536 billion yuan, a decrease of 6.93% from the same period last year. In the first quarter of 2024, the company's new production capacity will be gradually released, and the capacity utilization rate will exceed 90%. The orders and needs of the company's main customers in the field of new energy vehicles and auto parts remain stable, and the company grasps the trend of the times and actively cooperates with the research and development of magnetic components for humanoid robots of world-renowned customers.
2. What is the reason for the decrease in the company's gross profit margin during the reporting period compared with the same period in 2023?
Jinli Permanent Magnet responded: The company's gross profit margin in the first quarter of 2024 was 10.04%, a decrease of 5.2 percentage points from the gross profit margin of 15.24% in the same period in 2023. The main reasons are as follows:
(1) In the first quarter of 2024, the prices of major rare earth raw materials showed a downward trend. In addition, the average price in January 2024 was 504,500 yuan/ton, and the average price decreased to 431,900 yuan/ton in March 2024. Since the beginning of the year, the price of rare earth raw materials has fluctuated significantly, and the difference between cost and selling price in the short term will have a certain impact on the gross profit margin.
(2) The company implements the strategy of purchasing rare earth raw materials by sales and production, and the company's inventory issuance is valued using the weighted average method. In the first quarter of 2024, in addition to the rare earth raw materials purchased by sales and production, the company was also affected by the following two rare earth raw material purchases, resulting in a high cost of raw materials accounted for by the weighted average method, resulting in a decrease in gross profit margin.
1) Customer A paid the advance payment designated for the purchase of rare earth raw materials in 2023 (reflected in the contract liabilities at the end of 2023), and the company made special purchases in accordance with the contract. The lock-up contract has not yet been executed in the first quarter of 2024.
2) Customer B changed the delivery plan of some orders after the company purchased rare earth raw materials according to the original plan, involving about 600 tons of rare earth metals purchased. The lock-up contract has not yet been executed in the first quarter of 2024.
The impact of the above two factors on gross margin in the first quarter of 2024 is approximately 4 percentage points. In addition, due to the order coverage, the above-mentioned rare earth raw materials do not need to be provided for impairment losses, and the corresponding profits will be realized after the execution of the contract.
3. In the current competitive landscape, what advantages does the company have compared with its peers?
Jinli permanent magnet response: the company has been committed to the research and development, production, sales and recycling of high-performance NdFeB permanent magnet materials, and focuses on new energy and energy conservation and environmental protection applications, is one of the fastest growing companies in the high-performance NdFeB permanent magnet material industry, with more prominent competitive advantages, as follows:
(1) The company is the world's leading manufacturer of high-performance rare earth permanent magnet materials, with a global star-studded customer base. In the field of new energy vehicles, the company's products are used by the world's top ten new energy vehicle manufacturers to produce drive motors; In the field of energy-saving inverter air conditioners, eight of the top ten manufacturers of inverter air conditioning compressors in the world are the company's customers; In the field of wind power, five of the world's top ten wind turbine manufacturers are corporate customers;
(2) The company adheres to long-termism, and the strategy is clear and gradually and effectively implemented;
(3) The company has strong product delivery capabilities;
(4) The company has established long-term strategic cooperation with major rare earth suppliers;
(5) The company has strong production optimization R&D capabilities and industry-leading grain boundary penetration technology;
(5) The company has the world's industry-leading ESG construction and supports carbon neutrality development with practical actions;
(7) The company has a first-mover advantage in the industry of high-performance rare earth permanent magnet materials and magnetic components;
(8) The company's management team is mature and stable, and actively optimizes the business layout;
(9) The company has certain cash reserves and has financial advantages.
4. What is the situation of the company's new energy vehicle field during the reporting period?
Jinli Permanent Magnet responded: The orders and needs of the company's major customers in the field of new energy vehicles and auto parts remained stable, and the company's products were used by the world's top ten new energy vehicle manufacturers to produce drive motors.
In March 2024, the State Council issued the "Action Plan for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in", proposing to implement four major actions: equipment renewal, consumer goods trade-in, recycling and recycling, and standard improvement. By 2027, the number of end-of-life vehicles will be about double compared to 2023, the volume of used car transactions will increase by 45% compared to 2023, and the volume of waste household appliances will increase by 30% compared to 2023. Rare earth permanent magnet materials play an indispensable core role in promoting high-quality development such as intelligent manufacturing and green manufacturing.
5. What is the company's inventory strategy under the current rare earth price?
Jinli Permanent Magnet Response: The company mainly adopts the production management mode of sales and production, and the company adjusts the procurement and inventory strategy of rare earth raw materials in a timely manner according to the fluctuation trend of rare earth prices and orders in hand.
6. What is the company's current capacity expansion plan?
Jinli Permanent Magnet responded: In the first quarter of 2024, the company's new production capacity will be gradually released, and the capacity utilization rate will exceed 90%. The 12,000 tons/year production capacity project of Baotou Phase II, the 3,000 tons/year high-end magnetic materials and 100 million sets of module production capacity project in Ningbo, and the Ganzhou high-efficiency and energy-saving motor magnetic material base project are under construction as planned, and it is expected that a 38,000 tons/year blank production line will be completed by the end of 2024. It is planned to build a production capacity of 40,000 tons of high-performance rare earth permanent magnet materials and an advanced magnetic component production line by 2025.
7. What is the status of the company's H-share placement project?
Jinli Permanent Magnet responded: The company's new plan to issue H shares has been deliberated and approved by the company's board of directors, and needs to be submitted to the company's general meeting of shareholders for review and implementation.
8. Will there be any changes in the revenue structure after the company's new production capacity is put into operation?
Jinli permanent magnet response: the company is a research and development, production and sales of high-performance NdFeB permanent magnet materials, magnetic components and rare earth permanent magnet materials recycling and comprehensive utilization of high-tech enterprises, the company's products are widely used in new energy vehicles and auto parts, energy-saving inverter air conditioning, wind power, 3C, robots and industrial servo motors, energy-saving elevators, rail transit and other fields, the company's new production capacity will still focus on the above areas for layout, the company's product business areas have not undergone major changes.
According to the first quarter report of 2024, the company achieved operating income of 1.536 billion yuan in the first quarter of 2024, a year-on-year decrease of 6.93%; net profit was 102 million yuan, down 42.93% year-on-year.
In the first quarter of 2024, the company worked hard to overcome the adverse factors of the continued decline in the price of rare earth raw materials and the intensification of competition in the industry. The company has sufficient orders in hand, new projects have been gradually implemented, production capacity has been steadily increased, the company's production management informatization and automation have been accelerated, the company's ESG construction has been strengthened, and the business in emerging fields such as humanoid robots has been actively expanded. In the first quarter of 2024, the company's new production capacity will be gradually released, and the capacity utilization rate will exceed 90%. The orders and needs of the company's main customers in the field of new energy vehicles and auto parts remain stable, and the company grasps the trend of the times and actively cooperates with the research and development of magnetic components for humanoid robots of world-renowned customers.
In the first quarter of 2024, the company's gross profit margin was 10.04%, a decrease of 5.2 percentage points from the gross profit margin of 15.24% in the same period of 2023. The main reasons are as follows: 1. In the first quarter of 2024, the prices of major rare earth raw materials showed a downward trend. Since the beginning of the year, the price of rare earth raw materials has fluctuated significantly, and the difference between cost and selling price in the short term will have a certain impact on the gross profit margin. 2. The company implements the strategy of purchasing rare earth raw materials by sales and production, and the company's inventory issuance is valued by the weighted average method. In the first quarter of 2024, in addition to the rare earth raw materials purchased by sales and production, the company was also affected by the following two rare earth raw material purchases, resulting in a high cost of raw materials accounted for by the weighted average method, resulting in a decrease in gross profit margin. (1) Customer A paid the advance payment designated for the procurement of rare earth raw materials in 2023 (reflected in the contract liabilities at the end of 2023), and the company made a special purchase in accordance with the contract. The lock-up contract has not yet been executed in the first quarter of 2024. (2) Customer B changed the delivery plan of part of the order after the company purchased rare earth raw materials according to the original plan, involving about 600 tons of rare earth metals that had been purchased. The lock-up contract has not yet been executed in the first quarter of 2024. The impact of the above two factors on gross margin in the first quarter of 2024 is approximately 4 percentage points. In addition, due to the order coverage, the above-mentioned rare earth raw materials do not need to be provided for impairment losses, and the corresponding profits will be realized after the execution of the contract.
The 2023 annual report previously released by JLMG shows that the price of rare earth raw materials has fluctuated significantly since the beginning of 2023. The company's management adopted response strategies in a timely manner, grasped market opportunities, and stabilized operations. In 2023, the company's total sales volume of high-performance rare earth permanent magnet materials was 15,122 tons, an increase of 25.60% over the same period of the previous year. At the same time, the company continued to increase R&D investment in magnetic materials, magnetic components and robot automation, and the company's R&D expenses in 2023 were 354 million yuan, an increase of 4.86% over the same period of the previous year, accounting for 5.29% of operating income. During the reporting period, the company continued to focus on the fields of new energy, energy conservation and environmental protection, focusing on core application fields such as new energy vehicles and auto parts, energy-saving inverter air conditioners, wind power generation, 3C, robots and industrial servo motors, and energy-saving elevators. In 2023, the company achieved operating income of 6687.8644 million yuan, a year-on-year decrease of 6.66%; the domestic sales revenue was 5438.6422 million yuan, a year-on-year decrease of 14.30%, and the overseas sales revenue was 1249.2222 million yuan, a year-on-year increase of 52.57%; the net profit attributable to shareholders of the listed company was 563.6928 million yuan, a year-on-year decrease of 19.78%; the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses was 493.4034 million yuan, a year-on-year decrease of 27.68%; Excluding the foreign exchange gains of RMB150 million from the listing and financing of Hong Kong stocks in 2022 and the new R&D expenses of RMB16.4 million this year, the company's net profit in 2023 remained basically stable compared with that in 2022.
Jinli Permanent Magnet said: The company's gross profit margin in 2023 is 16.07%, a slight decrease from the gross profit margin of 16.18% in 2022. 1. Since the beginning of 2023, the price of rare earth raw materials has fluctuated significantly, and the difference between cost and selling price in the short term will have a certain impact on the gross profit margin. 2. In the fourth quarter, due to the impact of intensified market competition, the decline in the unit price of products exceeded the decline in unit cost, which made the gross profit margin in the fourth quarter decline significantly, thus lowering the gross profit margin level for the whole year.
In 2023, the company's revenue in the field of new energy vehicles and auto parts will reach 3.303 billion yuan, an increase of 14.33% over the same period of the previous year, and in 2023, the company's sales volume of new energy vehicle drive motor magnet products can assemble about 3.9 million new energy passenger vehicles, and according to the data released by CleanTechnica, the global sales of new energy passenger vehicles in 2023 will be 13.6893 million. As a leading supplier of magnets for drive motors in the global new energy vehicle industry, the company's products have been adopted by the world's top ten new energy vehicle manufacturers. In November 2023, the company won the "Special Contribution Award" at the BYD New Energy Vehicle 2023 Core Supplier Conference for its outstanding comprehensive strength and contribution. In 2023, the company's revenue in the field of energy-saving inverter air conditioners will reach 1.324 billion yuan, and the sales volume of the company's energy-saving inverter air conditioning magnet products can be assembled with about 54 million inverter air conditioning compressors. The company continues to maintain a leading position in the field of energy-saving inverter air conditioners in the world, and eight of the top ten manufacturers of inverter air conditioning compressors in the world are corporate customers. In January 2024, the company won the 2023 "Excellent Supplier" award issued by Midea's Industrial Technology Business Group. In 2023, the company's revenue in the field of wind power generation will reach 585 million yuan, and the company's product sales in this field can assemble an installed capacity of about 3.9GW of wind turbines, and five of the world's top ten wind power manufacturers are the company's customers. The company has been awarded the AAAAA supplier of Goldwind Quality Credit for nine consecutive years. In 2023, the company's revenue in the field of robots and industrial servo motors will reach 217 million yuan, in addition, the company has also actively deployed new energy, energy-saving and environmental protection fields such as 3C, energy-saving elevators, rail transit, etc., and has become one of the important suppliers of high-performance magnets in these fields.
When introducing its performance drivers and industry position in 2023, Jinli Permanent Magnet mentioned that in 2023, the company's total output of high-performance rare earth permanent magnet materials was 15,154 tons, an increase of 18.52% over the same period of last year, of which 13,226 tons of high-performance rare earth permanent magnet material products were produced using grain boundary penetration technology, an increase of 32.72% over the same period of last year, accounting for 87.28% of the company's total product output in the same period, an increase of 9.34 percentage points over the same period of last year. In 2023, the company's total sales volume of high-performance rare earth permanent magnet materials was 15,122 tons, an increase of 25.60% over the same period of the previous year.
JLMG's 2024 business plan states that the company's business policy for 2024 formulated by the company's board of directors is "customer-oriented, focusing on the main business, innovating and R&D, and climbing the peak". The company will continue to improve lean, quality, production efficiency and information management through innovative technology, supplement industrial chain resources, continue to improve production capacity, and continuously improve ESG work to achieve stable development of the company. In order to implement the above business policies, the company's 2024 business plan is as follows: (1) The construction plan of the project under construction and multi-base production is not only the customer's requirement for supply chain security, but also conducive to the company's risk diversification, cost reduction, and better access to resources. The company will actively promote the construction of Baotou's "annual output of 12,000 tons of high-performance rare earth permanent magnet material base project (phase II)", Ningbo's "annual output of 3,000 tons of high-end magnetic materials and 100 million sets of components project", and Ganzhou's "high-efficiency and energy-saving motor magnetic material base project". Plan Mexico's investment in the construction of "annual output of 1 million units/sets of magnetic assembly production line project". Through the continuous improvement of the production capacity layout, seize the development opportunity of the downstream market, expand the scale of production capacity, achieve scale effect, enhance the company's market competitiveness in various fields, and realize the continuous improvement of the company's profitability. In short: the company will adhere to customer orientation, adhere to long-termism, adhere to the main business, seize the development opportunity of the demand for humanoid robot magnetic components, strive to improve technological innovation and cost reduction and efficiency increase capabilities, and strive to build a 40,000-ton high-performance rare earth permanent magnet material production capacity and advanced magnetic component production line in 2025. In the future, we will build a world-class leading enterprise of rare earth permanent magnets and magnetic components with leading advantages in technology, scale and cost, advanced magnetic components, support of rare earth recycling industry chain, and low-carbon ESG system, so as to contribute to the great cause of "carbon peak in 2030" and "carbon neutrality in 2060", and create greater value for shareholders and society.
Guoyuan Securities issued a research report on April 18, saying that it gave Jinli Permanent Magnet an overweight rating. The main reasons for the rating include: 1) high-performance rare earth permanent magnet materials are widely used and the market demand is growing rapidly; 2) The company is the world's leading producer of high-performance rare earth permanent magnets, and the production and sales of NdFeB continue to grow; 3) Focusing on the stable operation of the main business, the field of new energy vehicles has maintained rapid growth on a high base. Risk warning: rare earth raw material price fluctuation risk, policy risk, overseas sales risk.
China Post Securities issued a research report on April 18, saying that it gave Jinli Permanent Magnet a buy rating. The main reasons for the rating include: 1) short-term performance under pressure, continuous optimization of product structure; 2) The proportion of high-performance magnetic materials is growing, and the core technology maintains the leading position in the industry; 3) The production capacity is gradually landed, and the product delivery capacity is strong; 4) High-performance rare earth permanent magnet materials are widely used, and the market demand is growing rapidly. Risk warning: the macro economy exceeds expectations, the downstream demand is less than expected, and the project construction is less than expected.
Looking back at the rare earth price performance in 2023 and this year, it can be seen that:
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》Order to view historical SMM metal spot price movements
In 2023, from the perspective of rare earth market prices, in 2023, the annual decline of praseodymium neodymium oxide will be 37.76%, the annual decline of dysprosium oxide will be 0.2%, and the annual decline of terbium oxide will be 46.95%. Looking back at the price trend of NdFeB in 2023, it can be seen that the historical price trend of NdFeB blank 50SH is still in a downward trend as a whole, although it has rebounded due to the peak season effect in the middle. In 2023, whether it is the import and export of rare earths, production or rare earth indicators, it can be seen that the supply of rare earths will grow steadily in 2023, while on the demand side, the number of orders received by downstream magnetic material companies in 2023 will be less than expected, so affected by the overall oversupply of rare earth products in 2023, rare earth prices will be in a downward trend in 2023.
Entering 2024, after experiencing the weakness in the early stage, rare earths began to usher in an overall rebound at the end of March. In April, the overall trend of rare earth prices was strong, with praseodymium neodymium oxide up 13.98% in April, dysprosium oxide up 12.09% in April, and terbium oxide soaring 23.69% in April. According to SMM, in April, in the case of serious compression of mine profits, relatively tight supply of raw materials, and the expectation that market demand will remain strong, the quotation of upstream mine holders was firm. The difficulty of finding low-priced raw materials in the market further supports the quotation strategies of upstream miners.
Against the backdrop of high raw material costs and relatively low supply, oxide prices have also remained at a high level. Entering May, with the blessing of many factors of good news in the market, rare earth prices continued the strong trend in the early stage, but the high price of raw materials and the uncertainty of supply made end buyers more cautious when purchasing, and the market game sentiment became stronger, which may lead to the stalemate of market transactions and the uncertainty of price fluctuations. SMM expects that the price trend of rare earth products will be dominated by a narrow range of fluctuations.