Core Viewpoint - The report by Pacific Securities on Zhenghai Magnetic Materials emphasizes the company's focus on its core business and high-quality development, resulting in a "buy" rating for the stock [1] Financial Performance - In the first half of 2025, the company achieved total operating revenue of 3.057 billion yuan, a year-on-year increase of 20.42% - Profit before tax reached 104 million yuan, a decrease of 33.2% year-on-year - Net profit attributable to shareholders was 113 million yuan, down 24.39% year-on-year, with operating costs rising by 26.39%, leading to pressure on gross margin and profitability [2] Industry Position and Product Development - The company leads the nation in rare earth permanent magnet technology and production volume - Continuous R&D efforts on "heavy rare earth-free magnets," "low heavy rare earth magnets," and "ultra-light rare earth magnets" have reduced production costs and improved product performance, ensuring a technological edge in high-performance NdFeB permanent magnet materials - By 2024, the company's rare earth permanent magnet production capacity is expected to reach 30,000 tons, with an output of 20,781 tons, and rare earth permanent magnet revenue accounting for over 99% of total revenue [3] Market Demand and Strategic Positioning - Long-term growth in demand for rare earth permanent magnets is anticipated, driven by the increasing penetration of electric vehicles, with approximately 2-3 kg of rare earth magnets used per pure electric vehicle and about 1.5 kg per plug-in hybrid vehicle - Emerging markets such as humanoid robots and eVTOLs are expected to drive further demand - The company has established comprehensive coverage of top international and domestic automotive brands, with a 100% coverage rate among the top 10 global automotive brands and top 5 domestic brands [4] Supply Chain and Pricing Dynamics - China remains the largest supplier of rare earth resources globally, with a 2024 quota of 270,000 tons, reflecting a 6.36% year-on-year increase for light rare earths and a stable supply for heavy rare earths - The price of rare earths has been on the rise since 2025, benefiting the entire industry chain, and the company is expected to gain from this upward trend [5] Investment Outlook - The company is positioned as a leader in rare earth permanent magnet technology and production, with a diverse client base including many well-known domestic and international companies - The forecast for net profit attributable to shareholders for 2025-2027 is 290 million yuan, 480 million yuan, and 590 million yuan, respectively, with corresponding P/E ratios of 53x, 32x, and 26x, leading to an "accumulate" rating [6]

Group 1: R&D and Product Development - The company has a total of approximately 302 authorized and pending invention patents, representing a 47% year-on-year increase, achieving international advanced technical strength [1] - In 2024, the coverage of products related to grain optimization technology (TOPS) reached 97%, while diffusion technology (THRED) exceeded 80%; the output of non-rare earth magnets increased by 50% year-on-year [1][2] - The company’s products are highly compatible with core components for humanoid robots, and small batch supplies have been delivered to downstream customers [2] Group 2: Sales and Market Performance - The company’s product sales have achieved continuous growth for seven consecutive years, with sales in the energy-saving and new energy vehicle markets increasing by 25% and 28% respectively [2] - The pricing model is based on cost-plus, considering production difficulty, and the company adopts a sales-driven production management model [1][2] Group 3: Product Advantages - The company’s products feature low rare earth content, low weight loss, high consistency, high working temperature, and high coating reliability, maintaining world-leading performance [3] - Continuous development of series products such as "non-rare earth magnets," "low rare earth magnets," and "ultra-light rare earth magnets" ensures competitive performance, quality stability, and cost-effectiveness [3] Group 4: Procurement and Supply Chain - The procurement model combines strategic and dynamic procurement, ensuring stable supply of raw materials through established channels and a comprehensive supplier management system [3] - The company formulates raw material procurement plans based on production requirements, ensuring a stable supply through bidding or price comparison [3] Group 5: Market Competitiveness and Strategy - The company has a 100% coverage rate with the top 10 international automotive brands and top 5 domestic brands in the energy-saving and new energy vehicle sectors [4] - The development strategy focuses on technological innovation, continuous improvement, and systematic management to achieve the vision of becoming a leader in the global permanent magnet materials industry [4]

Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [1]. Core Viewpoints - The company, Zhenghai Magnetic Materials, reported a revenue of 5.539 billion yuan in 2024, a year-on-year decrease of 5.70%, and a net profit attributable to shareholders of 92 million yuan, down 79.37% year-on-year [4][13]. - In Q1 2025, the company achieved a revenue of 1.459 billion yuan, representing a year-on-year increase of 24.38%, while the net profit attributable to shareholders was 69 million yuan, showing a decline of 10.94% [14]. - The company is focusing on its core business of magnetic materials, particularly in the high-performance neodymium-iron-boron permanent magnet sector, which is facing intense competition and price pressures [5][16]. Company Overview - The latest closing price of the company's stock is 12.59 yuan, with a total market capitalization of 10.5 billion yuan [3]. - The company has a total share capital of 838 million shares, with a debt-to-asset ratio of 54.5% and a price-to-earnings ratio of 114.45 [3]. Financial Performance - The company's revenue from neodymium-iron-boron permanent magnets in 2024 was 5.494 billion yuan, down 4.79% year-on-year, with a gross profit of 779 million yuan, a decrease of 24.60% [17]. - The gross margin for 2024 was 14.18%, down 3.73 percentage points from 2023 [17]. - The company expects revenues to grow to 6.382 billion yuan in 2025, with a projected net profit of 327 million yuan, reflecting a significant recovery [8][10]. Production and Market Development - The company has a production capacity of 30,000 tons for high-performance neodymium-iron-boron permanent magnets, with a utilization rate of 84% at its Yantai base and 62% at its Nantong base [6][18]. - The shipment volume for energy-saving and new energy vehicles increased by 25% in 2024, with a total of 5.61 million sets of electric motors equipped [19]. - The company is advancing the development of non-rare earth products, which have seen a 50% increase in production, enhancing its competitive edge in the market [7][19].

Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [1]. Core Views - The company focuses on its core business of magnetic materials, with continuous improvements in the performance of non-rare earth products [4][7]. - The company reported a decline in revenue and net profit for 2024, with revenue of 5.539 billion yuan, down 5.70% year-on-year, and a net profit of 0.92 billion yuan, down 79.37% year-on-year [4][13]. - In Q1 2025, the company achieved revenue of 1.459 billion yuan, a year-on-year increase of 24.38%, while net profit decreased by 10.94% [14]. Company Overview - The latest closing price is 12.59 yuan, with a total market capitalization of 10.5 billion yuan [3]. - The company has a total share capital of 838 million shares, with a debt-to-asset ratio of 54.5% and a P/E ratio of 114.45 [3]. Performance Analysis - The decline in 2024 performance is attributed to intense competition in the high-performance neodymium-iron-boron permanent magnet industry, leading to price pressures and a decrease in gross margin [5][16]. - The company's neodymium-iron-boron permanent magnet revenue and gross profit for 2024 were 5.494 billion yuan and 0.779 billion yuan, respectively, down 4.79% and 24.60% year-on-year [17]. - The company has a production capacity of 30,000 tons for high-performance neodymium-iron-boron permanent materials, with a utilization rate of 84% at the Yantai base and 62% at the Nantong base [6][18]. Future Outlook - The company is expected to benefit from the continued ramp-up of the Nantong base and a rebound in rare earth prices, projecting revenues of 6.382 billion yuan, 7.141 billion yuan, and 7.872 billion yuan for 2025, 2026, and 2027, respectively [8][10]. - The projected net profits for the same years are 0.327 billion yuan, 0.393 billion yuan, and 0.491 billion yuan, reflecting significant growth [10][11].

Group 1: Company Performance Overview - In 2024, the company achieved total revenue of CNY 5.539 billion, with a net profit attributable to shareholders of CNY 92 million, reflecting a decline in net profit due to various market pressures [2][3] - For Q1 2025, the company reported revenue of CNY 1.459 billion, a year-on-year increase of 24.83%, while net profit decreased by 10.94% to CNY 69 million [3] Group 2: Product Sales and Market Growth - The sales volume of high-performance NdFeB permanent magnet materials reached approximately 20,166 tons in 2024, marking a year-on-year increase of 17.39% [7] - The company’s sales in the energy-saving and new energy vehicle market grew by 25%, with a total of 561 million sets of energy-saving and new energy vehicle motors delivered [6] Group 3: Technological Advancements - The production of non-rare earth products increased significantly by 50% in 2024, driven by the application of advanced technologies such as "Zhenghai Anoxic Process" and "Grain Refinement Technology" [4] - The company is actively integrating machine learning and AI tools into the development of non-rare earth products to enhance performance [4] Group 4: Market Position and Strategy - The company maintains a leading position in the global market for high-performance sintered NdFeB magnets, particularly in the new energy vehicle sector, covering top international and domestic automotive brands [5] - The strategic focus for 2025 includes pursuing quality revenue growth, optimizing product and customer structures, and enhancing operational efficiency through technological and management innovations [8]