This report is read as follows:
Baotou Iron and Steel Co., Ltd. is a leading steel enterprise in northern China, which is rich in rare earth resources. The demand for rare earths is growing rapidly, the high prosperity of the industry continues, and after the change of the company's pricing mechanism, the company's profits will be more flexible.
Main points of investment:
Coverage for the first time, giving a "overweight" rating. The company is a leading steel enterprise in northern China, with rare earth resources. We predict that the EPS of the company in 2021-2023 will be 0.07 PE 0.14 shock 0.15 yuan respectively. With reference to similar companies, the company will be valued 21 times in 2022, corresponding to 3.02 yuan per share. Coverage for the first time, giving the company an "overweight" rating.
Leading steel enterprises in the north, the demand of the industry is picking up. Baotou Iron and Steel Co., Ltd. is a leading iron and steel enterprise in northern China, with a steel production capacity of 17.5 million tons, a full range of products and strong comprehensive competitiveness. Under the carbon neutralization policy, the capacity expansion of China's iron and steel industry is basically over. In 2022, 1.46 trillion of the special debt quota has been issued ahead of schedule, and infrastructure investment is expected to stabilize and pick up. In addition, the relief of automobile core shortage and the high increase in shipbuilding orders continue to support steel demand. We believe that steel demand will gradually pick up in 2022, and the company's steel sector performance will be gradually released.
Rare earth resources are rich, and the change of pricing mechanism brings profit flexibility. Baotou Iron and Steel Co., Ltd. has Bayan Obo tailings reservoir, rare earth oxide resources reserves of 13.82 million tons, ranking second in the world. The company's rare earth concentrate exclusive supply of rare earths in the north, the pricing mechanism of the company's rare earth concentrate has been changed to quarterly pricing since 2021, the price of the company's rare earth concentrate will be further raised in 2022, and the company's rare earth business performance will be released steadily.
The demand for rare earths is growing rapidly, and the high prosperity of the industry continues. The lower reaches of rare earths are mainly permanent magnetic materials and catalysts, accounting for 29% and 20% respectively. Since 2021, due to the rapid increase in the acceptance of new energy vehicle products, the global permeability of new energy vehicles has increased rapidly, driving the demand for permanent magnet materials.
Under the background of carbon neutralization, the increase in wind power installation will also support the demand for permanent magnet materials, and the high prosperity of the rare earth industry will continue.
Risk tip: sales of new energy vehicles have fallen sharply, and real estate investment has fallen sharply.
