Event: the company released its semi-annual report for 2022, with revenue of 2.755 billion yuan in the first half of the year, an increase of 88.33% over the same period last year, a net profit of 206 million yuan, an increase of 80.83%, and a deduction of 197 million yuan for non-parent net profit, an increase of 77.35% per share, an increase of 78.57%. 2022Q2, the company realized revenue of 1.69 billion yuan, an increase of 100.71% over the same period last year, an increase of 58.69% over the previous year, a net profit of 122 million yuan, an increase of 43.53% over the same period last year, an increase of 45.24% over the previous year, and a deduction of 120 million yuan for non-return net profit, an increase of 48.15% over the same period last year and 55.84% over the previous year. The company's performance is in line with expectations.

The company's performance growth mainly benefits from the boom in the downstream new energy vehicle market and the high prices of NdFeB and magnetic materials:

In the first half of the year, the average export price of NdFeB alloy permanent magnet increased by 56.10% over the same period last year, 38.28% from the previous year, 60.88% in the second quarter from the same period last year, and 24.01% from the previous year. The company's high-performance NdFeB permanent magnet materials and components business income increased by 92.09% over the same period last year, and net profit increased by 74.47% over the same period last year. On the other hand, the global sales of narrow new energy vehicles in the first half of 2022 was 4.21 million, an increase of 71% over the same period last year. Thanks to the high prosperity of the downstream new energy vehicle market, the company's energy-saving and new energy vehicle market revenue increased by 151% compared with the same period last year. Revenue accounted for more than 40%, an increase of about 10% over 2021.

The company's production capacity is expected to be concentrated in the second half of 2022, and the company's profits are expected to increase: the company's built capacity includes 1000 tons in the east-west plant area, 1000 tons in Fuhai production area and 6000 tons in Nantong base, and is expected to be released in the second half of 2022. It is expected to have an annual production capacity of 24000 tons by the end of 2022, an increase of 60% over 2021 and expected to reach 36000 tons in 2026. Nantong base project is currently one of the projects with the largest planned high-performance NdFeB production capacity in the magnetic materials industry, and it will greatly increase the company's profits after it is put into production.

Strengthen product research and development and dig deep into the new energy vehicle market: the company persists in independent research and development of core technologies, spending 117 million yuan on R & D in the first half of 2022, an increase of 26.06 percent over the same period last year. Through three core technologies (Zhenghai anaerobic process (ZHOFP), Grain Optimization Technology (TOPS) and heavy rare Earth Diffusion Technology (THRED), the production capacity of THRED (heavy rare Earth Diffusion Technology) has exceeded 11000 tons. At present, the company has formed a series of products such as low-weight rare earth magnets, non-heavy rare earth magnets and ultra-light rare earth magnets, including 58N, 55m, 56H, 56SH, 54UH, 51EH and other brands, whose properties have reached the world's leading level. The company has an active layout in the field of new energy vehicles. On the one hand, it strives to develop and maintain customers. The company's energy saving and new energy vehicle customers include nine of the top ten global automakers by sales, such as Volkswagen, Toyota Motor Corp, Nissan, General Motors Co, Ford, Hyundai, FAW Red Flag, Great Wall Motor, Polar Krypton and so on. In addition, it has also entered the core supply chain of many new forces, such as ideal, Zero run, Nezha, Weima and so on. On the other hand, the company develops the motor drive business through the subsidiary Shanghai Dayun, extends the industrial chain, and improves the company's customized product solving ability. although the revenue of the epidemic in Shanghai in the first half of 2022 is 60.17% lower than that of the same period last year, the net profit is 32.30% lower than that of the same period last year, but the company will continue to give strong support to Shanghai Daxun in terms of capital, management, and strengthening cooperation with strategic partners. Through deep ploughing the boom industry, continuous technology research and development, and orderly expansion of production capacity, the company can achieve common growth with the downstream boom industry to ensure the company's industry status.

Investment advice: we predict that the company's earnings per share from 2022 to 2024 will be 0.48,0.69 and 0.85 yuan respectively. The rate of return on net assets is 12.2%, 15.0% and 16.3% respectively.

Risk tips: investment in new projects, production progress is not as expected, downstream demand such as new energy vehicles is lower than expected, rare earth prices rise higher than expected, subsidiaries continue to lose money, and the epidemic affects the company's production and operation.