Events:
According to the company's first-quarter report in 2022, 2022Q1 achieved revenue of 20.2 billion yuan, 15% of the same period last year, and net profit of 330 million yuan, down 55% from the same period last year.
Comments:
Steel business: rising raw fuel prices are a drag on performance, and production cuts are expected to stabilize and rebound.
The prices of 2022Q1 thermal coal and ferrosilicon rose 19% and 27% respectively compared with the same period last year; and considering the preparation cycle of steel mills, the company's raw fuel costs should actually rise more; as a result, the company's 2022Q1 gross profit margin is only 7.7%, down 3.5pct from 2021. The regular meeting of the National Development and Reform Commission said that production reduction will continue in 2022; at present, it seems that flat control is the bottom line, and it is more likely to continue to reduce production. After the relief of the epidemic, steel will usher in a triple rebound of seasonal and delayed export demand at the beginning of the year, and steel demand is expected to grow by 1-2% for the whole year; steel fundamentals are expected to usher in a situation of rising steel prices and increased profits.
The company is expected to usher in the steel business is expected to stabilize the situation.
Rare earth business: after the price adjustment, the growth is rapid, and the boom continues. The income of the rare earth business of 2022Q1 Company reached 1.67 billion yuan, exceeding that of 2021H1. The company has renewed the rare earth concentrate supply contract with northern rare earths, and it is proposed that from January 1, 2022, the sales price of rare earth concentrates of both sides will be adjusted to 26887.20 yuan per ton excluding tax, with a total transaction volume of no more than 230000 tons. After the renewal, the price and trading volume of rare earths rose by 65% and 28%, respectively. Considering the rare earth concentrate absorption capacity of northern rare earths, we believe that the company's rare earth revenue is expected to reach nearly 7 billion yuan in 2022, an increase of more than 100% over the same period last year. The price of rare earths is high. Even after seasonal adjustment, the average price of praseodymium and neodymium oxide reached 860,000 yuan / ton in April, still at an all-time high. At present, the inventory of praseodymium and neodymium oxide is only 3411 tons, down 16% from the same period last year. Low inventory level underpins the price of rare earths. Due to the existence of price adjustment mechanism in the company's rare earth related party transactions in the north, we believe that the supply and demand pattern of rare earths is good, and prices are easy to rise but difficult to fall, so the company's rare earth business is expected to continue to contribute higher profits.
Profit forecast and investment rating: we predict that the company's income in 2022-2024 will be 870Universe 900.5 billion yuan respectively, an increase of 1% over the same period last year. Considering the company's 2022Q1 performance, we will adjust the company's 2022-2023 net profit from 75,000,000 million yuan to 354.5 billion yuan, that is, the company's 2022-2024 net profit will be 100 million yuan respectively, an increase of 22% 28% and 11% over the same period last year. The corresponding PE is 24max 18amp 21x, respectively. Considering the high growth of rare earth business, the fundamentals of the steel business benefit industry is expected to stabilize and pick up, profits are expected to continue to improve, and the company also has fluorite, thorium and other resources to be revalued. So maintain the company's "buy" rating.
Risk tips: demand is lower than expected, raw material costs fluctuate, product prices fluctuate.
