Company trends

The current situation of the company

On the evening of November 11, the company announced that its shareholding subsidiary, Zhongyun Mining, plans to acquire a 100 per cent stake in Hong Kong rare Earth, a 99 per cent stake in African Lion Mining, for US $5 million. Its main asset is the exploration right of Nkombwa in Zambia.

Comment

Join hands in geological prospecting of medium-sized ore resources and layout of upstream rare earth mines. Zhongyun Mining is a joint venture between the company and China Mineral Resources, which holds 45% of the shares and 55% of the shares of China Mineral Resources. We believe that, first, the company is expected to give full play to the advantages of both sides through the strong combination of the joint venture company and the leading geological prospecting resources, and the geological prospecting team of China Mineral Resources will undertake the exploration of rare earth ores. and according to the exploration results timely carry out the feasibility study of the project development, Ningbo Yunsheng will give full play to its advantages in the field of rare earth application, organize the follow-up development and sales of the project, and jointly promote the exploration and development of the project. Second, the company has successfully cut into the upper reaches of rare earths through this cooperation, laying the foundation for the stable supply of raw materials and subsequent expansion of magnetic production capacity.

Kongbuwa light rare earth ore is rich in reserves and has room to increase reserves. Kongbuwa rare earth deposit is mainly light rare earth mineral resources with good external development conditions. According to the company announcement, a total of 2.78 million tons of rare earth ore resources have been discovered so far, with an average grade of 2.76% of TREO, a total of 77000 tons of rare earth oxides, 21.82 million tons of associated phosphate ore resources and an average grade of 7.06% of phosphorus pentoxide. After preliminary exploration, the rare earth mining right area has a good prospecting prospect, and we believe that with the potential tapping ability of the professional geological exploration team of China Mineral Resources, the company is expected to further open the space to increase reserves.

The upstream layout ensures the supply of resources, and downstream magnets actively promote capacity expansion and grain boundary penetration capacity, and the total production capacity CAGR is expected to reach 60% in 2021-2023. First, the company layout upstream to improve the rate of resource self-sufficiency, reduce the cost of raw materials, is expected to enhance the competitiveness of NdFeB products. Second, according to the announcement, the company has formed an annual production capacity of 15000 tons of NdFeB blanks. The company expects to achieve an annual production capacity of 21000 tons of billets by the end of 2022, adding a capacity of 15000 tons to raise investment projects. By the end of 2023, it is expected to achieve an annual production capacity of 36000 tons of magnetic billets, and the production capacity CAGR will reach 60% in 2021-2023. Third, with the development road of "leading technology and pursuing originality", the company continues to promote the research and development of grain boundary diffusion technology. It is announced that it has the later production capacity of processing 10,000 tons of grain boundary diffusion NdFeB magnetic materials annually at the end of September. We believe that it is expected to further enhance the company's market share in the field of new energy automotive magnets.

Profit forecast and valuation

The current share price corresponds to 15.7 times / 12.6 times earnings for 22apt 23 years. Maintaining a neutral rating, taking into account the decline in market liquidity, lowered the target price by 10.4% to 12.72 yuan, corresponding to the price-to-earnings ratio of 18.5 times / 14.9 times in 23 years, which has 18.1% upside compared to the current stock price.

Risk.

Capacity release is less than expected, downstream demand is lower than expected, and raw material prices fluctuate.