The reform is full of new life, and the bibcock of medium and heavy rare earths opens a new chapter. Since 2022, the company has promoted the implementation of many reforms, vigorously promoted marketing reform, expanded the scale of production and marketing, and greatly improved its overall performance and profitability. In the first half of 2022, the company expects to realize a net profit of 160 million yuan to 210 million yuan, an increase of 91.27% over the same period last year to 151.04%. The company takes "three fine management" as the starting point, implements various measures to reduce costs and increase efficiency, and further enhances the company's economic benefits; in addition, the company is carrying out salary reform to link employee compensation with performance, which greatly improves the enthusiasm of employees. Since Guangsheng Nonferrous made a turnaround in 2019, its business performance has continued to grow. 2022 will be the company's first brilliant year, and the future growth of the company is worth looking forward to.

Rare earth industry resources are the king, and the company's resource supply is fully guaranteed. As the only legal main body of rare earth mining in Guangdong Province, the company has fully excavated existing mines in recent years, and at the same time accelerated the acquisition of high-quality mineral projects inside and outside the province to strengthen its own resource advantages and mineral supply. At present, the company has two own rare earth mines, Pingyuan Renju rare Earth Mine and Dapu Wufeng rare Earth Mine, with an output of 531 tons and 150 tons respectively in 2021. On July 10, 2022, Guangsheng Nonferrous announced that the holding subsidiary Xinfeng Company had completed all the certification procedures for the mining rights of Zuokeng rare Earth Mine, marking the company's addition of 111400 tons of high-quality southern ionic rare earth reserves, greatly thickening the company's rare earth reserves, and is expected to start production this year. In addition, the company has two tungsten concentrates, Hongling Tungsten Mine and Shirenzhang Tungsten Mine.

Comprehensive layout of the rare earth industry chain, magnetic materials business has become a new bright spot of performance growth. The company has formed a complete industrial chain of rare earth mining, smelting separation, deep processing and rare earth research and development. In the future, the company will further make good use of the distribution indicators and strive to increase the output of rare earth ores, smelting separation and magnetic materials. In 2021, the company successfully realized the layout of the whole rare earth industry chain through the relocation technical transformation of the core rare earth separation enterprises and marching into the field of downstream magnetic materials. Holding subsidiary Guangdong Shengyuan annual production of 8000t/a high-performance NdFeB permanent magnet project has completed the preparatory work, the first batch of 3000 tons of magnetic materials is expected to be put into production by the end of this year.

Investment advice. Guangsheng Nonferrous is the leader of medium and heavy rare earths in China. In recent years, the company has accelerated the development and construction of its own mines and mergers and acquisitions of external mineral resources. Through the layout of the whole rare earth industry chain and focusing on the company's own reform and innovation, enterprise profitability and product core competitiveness will be rapidly improved. In addition, the company continues to strengthen internal management, further improve the level of management, and link employee compensation to performance, which greatly improves the enthusiasm of employees and improves the overall efficiency of the company. It is estimated that the company's earnings per share from 2022 to 2023 will be 0.86 yuan and 1.36 yuan respectively, corresponding to 70.72 times and 44.76 times PE respectively, and the company will be upgraded to the recommended rating.

Risk hint. The risk of macroeconomic fluctuations; the risk of lower-than-expected demand for rare earths and magnetic materials; the risk of fluctuations in rare earth prices; the risk of poor progress in project bidding; risks such as production safety and environmental protection; and the occurrence of force majeure events such as natural and man-made disasters.