Bank of America Securities: Initiate coverage on Jinli Permanent Magnet (06680) with a "Buy" rating, target price HKD 24

Bank of America Securities has issued a research report covering JINLIYONGCI (06680) H-shares and A-shares for the first time, both with a “Buy” rating. The target price for H-shares is HKD 24, and for JINLIYONGCI (300748.SZ) A-shares, it is RMB 36. The bank is optimistic about the company’s market expansion potential driven by new energy heavy trucks and humanoid robots, stable upstream raw material supply, high customer stickiness, rapid market share growth, and the current valuation is not expensive.

The bank notes that JINLIYONGCI, as a global leading producer of high-performance NdFeB permanent magnet materials, secures raw materials through long-term contracts with China’s two major rare earth suppliers at prices about 10% below spot market prices. The high technical barriers and long certification cycles in the high-performance magnetic materials industry mean that once customers become approved suppliers, they typically sign long-term contracts and co-develop products with downstream partners. The company has established long-term partnerships with leading global electric vehicle and humanoid robot manufacturers.

Bank of America Securities forecasts that global demand for high-performance magnetic materials will grow at a compound annual rate of 9% from 2025 to 2028. Although growth in new energy vehicle sales may slow, the magnetic material usage per vehicle will continue to increase due to multi-motor configurations. Supported by policies, new energy heavy trucks use about three times more magnetic materials per vehicle than regular electric vehicles. Regarding humanoid robots, the bank’s industrial team predicts that global shipments will reach 1.2 million units in 2030 and 10 million units in 2035. As the degrees of freedom increase, the demand for actuators and magnetic materials per robot will also rise.

The bank expects JINLIYONGCI’s market share to increase from 19% last year to 25% by 2028. Net profit forecasts for 2026 and 2027 are expected to grow by 30% and 44%, respectively. The H-share target price is based on a discounted cash flow model with a weighted average cost of capital of 8.5% and a terminal growth rate of 4%. The A-share target price is calculated based on a 73% A/H premium. The current H-share price implies a forward P/E ratio of about 21x for 2026-2027, with the target price corresponding to a forward P/E of about 27x. Compared to industry peers in humanoid robots and EV components, with P/E ratios of 59x and 40x respectively, the valuation appears attractive.