Bank of America Securities has issued a research report initiating coverage on JLMAG (06680) H-shares and A-shares, assigning a "Buy" rating to each. The price target for H-shares is set at HK$24, while the target for A-shares (300748.SZ) is set at 36 Chinese yuan. The bank is optimistic about the company's market expansion potential driven by new energy heavy-duty trucks and humanoid robots, its stable upstream raw material supply, high customer loyalty, rapid market share growth, and current valuation, which is not considered expensive. The report notes that JLMAG, as a leading global producer of high-performance neodymium iron boron permanent magnet materials, secures its raw material supply through long-term contracts with two major Chinese rare earth suppliers at prices approximately 10% below spot market rates. The high-performance magnet industry features high technical barriers and lengthy certification cycles; once a customer approves a supplier, long-term contracts are typically signed, often involving joint product development with downstream partners. The company has already established long-term cooperative relationships with leading global electric vehicle and humanoid robot manufacturers. Bank of America Securities forecasts that global demand for high-performance magnets will see a compound annual growth rate of 9% between 2025 and 2028. Although growth in new energy vehicle sales may slow, the volume of magnets used per vehicle is expected to continue increasing due to multi-motor configurations. New energy heavy-duty trucks, benefiting from policy support, use approximately three times the magnet volume per vehicle compared to standard electric cars. Regarding humanoid robots, the bank's industrial team projects global shipments will reach 1.2 million units by 2030 and 10 million units by 2035. As degrees of freedom increase, the number of actuators and volume of magnets required per robot will also rise. The bank expects JLMAG's market share to increase from 19% last year to 25% by 2028, with net profit forecasts predicting growth of 30% in 2026 and 44% in 2027. The H-share target price is based on a discounted cash flow valuation model using a weighted average cost of capital of 8.5% and a terminal growth rate of 4%. The A-share target price incorporates a 73% A/H premium. At its current price, the H-shares trade at approximately 21 times the forecasted price-to-earnings ratio for 2026-2027, while the target price implies a P/E ratio of about 27 times. This valuation appears attractive compared to the 59 times and 40 times P/E ratios of peers in the humanoid robot and electric vehicle components sectors.
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