The company's 22Q1-Q3 net profit is + 78.63% compared with the same period last year, maintaining the "buy" rating company 22Q1-Q3 revenue of 12.879 billion yuan (yoy+65.30%) and parent net profit of 1.485 billion yuan (yoy+78.63%), of which 22Q3 revenue is 4.117 billion yuan (yoy+40.62%, qoq-6.90%), and home net profit is 138 million yuan (yoy-52.2%, qoq-78.3%). We adjust the rare earth price assumption according to the market trend, so we lower the profit forecast. It is estimated that the EPS of the company in 22-24 will be 1.02 yuan 0.99max 1.24 yuan (the previous value 1.33 pound 1.41 pound 1.46 yuan), the average 2022PE of the comparable company is 18.3x, give the company 18.3xPE valuation (2022E), and maintain the "buy" rating corresponding to the target price of 18.69 yuan (the previous value is 24.90 yuan).
The company's 22Q3 gross profit margin and net profit rate decreased month-on-month, 8.45pct, 10.14pct 22Q3 single-quarter sales of rare earth oxides / rare earth salts / rare earth metals / zircon sand / ilmenite (containing rutile) / rare earth concentrate (including monazite) were-5.00% and 27.80% respectively. Gross profit margin is respectively compared to-18.48pct/-18.05pct/-2.81pct/-14.15pct/-11.09pct/-6.99pct. 22Q3 single-quarter overall gross profit margin 9.97% (yoy-6.21pct, qoq-8.45pct), period expense rate 3.67% (yoy-2.68pct, qoq+1.31pct), net profit rate 3.95% (yoy-6.17pct, qoq-10.14pct).
The decline in rare earth price is the main reason for the month-on-month decline in Q3 performance.
According to Wind, due to the poor downstream demand and the increase in 22H2 rare earth quotas, there is a periodic surplus in the rare earth industry, and the prices of mainstream rare earths are all adjusted to varying degrees. The average prices of praseodymium-neodymium oxide, dysprosium oxide and terbium oxide Q3 were 720000 / ton, 2.28 million / ton and 13.34 million / ton respectively, which decreased by 180000 / ton, 290000 / ton and 880000 / ton compared with Q2. The company's profit per ton of rare earth products fell, and Q3 formed an asset impairment of about 122 million.
The company actively distributes overseas rare earth resources.
According to the Investor Relations activity record sheet of September 19, 2022, the company began to set up an overseas project team in 2013 to conduct in-depth research on overseas projects and follow them continuously for a long time. In terms of overseas resources development cooperation, the company has unique technology and rich experience, as well as successful cases, such as the Mount pass Mine in the United States, and has also invested in a high-performance magnetic material project in which the company holds a 10% stake. And in order to accelerate the development of the Ngualla rare earth mine project in Tanzania, Sheng and Singapore (with a 19.9% stake in Peak) signed a non-binding memorandum of understanding with Peak on October 19, 22, covering the off-take of rare earth products, strategic cooperation and Shenghe's direct acquisition of interests in the Ngualla project.
Risk tips: sharp fluctuations in raw material prices lead to impairment losses, new projects are put into production lower than expected, and downstream demand is lower than expected.