PRCO(002225) NORTHEAST SECURITIES·2025-05-09 07:56Investment Rating - The report initiates coverage with a "Buy" rating for the company [3] Core Views - The company has a leading position in the refractory materials industry, with significant growth potential in its active magnesium oxide business for wet metallurgy [3][15] - The company is expected to see a recovery in profitability from its domestic refractory business in 2025, driven by improved competition dynamics and raw material price stabilization [2][3] Company Overview - Established in 2002 and listed in 2008, the company has over 30 years of experience in high-temperature industrial products and solutions [15] - The company has expanded internationally since 2000, with production bases in the USA and Serbia, and a strong brand presence [15][16] - In 2024, the company is projected to achieve revenue of 5.19 billion yuan and a net profit of 140 million yuan [1] Industry Overview - The refractory materials industry in China is under pressure, with a projected production of 22.07 million tons in 2024, down 4% year-on-year, primarily due to the downturn in the steel industry [2][54] - The steel industry is the main downstream market for refractory materials, accounting for approximately 70% of demand [58] Domestic Refractory Business - The competitive landscape is expected to improve due to rising concentration in the steel industry and enhanced environmental standards [2][79] - The company’s revenue from overall contracting services in 2024 is expected to account for 49% of total revenue [79] Overseas Refractory Business - The company is positioned to benefit from its overseas operations, with 28% of revenue coming from international markets in 2024 [2][16] - The company has established a direct sales network overseas, making it the first domestic refractory materials company to do so [16] Financial Summary - The company forecasts revenue growth from 5.61 billion yuan in 2025 to 6.37 billion yuan in 2027, with net profit expected to rise from 299 million yuan to 498 million yuan over the same period [4] - The projected price-to-earnings (PE) ratios for 2025, 2026, and 2027 are 18, 14, and 11, respectively [3] Raw Material Prices - The price of alumina is expected to decline in 2025, while magnesium sand prices may stabilize or increase [2][3][72]