Event: the company issued a performance forecast for 2022, which is expected to achieve a net profit of 362 million yuan to 462 million yuan in 2022, an increase of 85.01% to 136.19% over the same period last year, and a net profit of 371% to 441 million yuan, an increase of 95.98% to 132.97% over the same period last year.
The performance maintained a high growth rate in the first three quarters, and was negative in the fourth quarter due to the decline in rare earth prices. The subsequent rebound in rare earth prices is expected to repair the profit level: in the first three quarters of 2022, the company achieved operating income of 3.169 billion yuan, an increase of 58.21% over the same period last year, and a net profit of 368 million yuan, an increase of 85.99% over the same period last year. According to the company's latest performance forecast, the company's performance for the whole year of 2022 is expected to reach 362 million yuan, of which the fourth quarter is-0.07 billion yuan, with a median of 43 million yuan, turning losses into profits over the same period last year and-31.44% compared with the previous year. Quarter-on-quarter decline in performance is mainly due to the impact of falling rare earth prices, the current rare earth prices have slowly rebounded, follow-up earnings are expected to continue to improve.
Plan to acquire Jianghua rare earths and improve the layout of the rare earth industry chain: on December 31, 2022, the company announced that it intends to acquire 94.67% of Jianghua rare earths for 1.43 billion yuan through a non-public offering of A shares. Jianghua rare earth mine project has entered the stage of production and operation, which has the largest mining index of single ionic rare earth in the country. Its mining area is about 11.74 square kilometers, with a mineral volume of 35.42 million tons, rare earth oxides of 37890 tons (REO 0.11%) and a production scale of 3.02 million tons per year. In the first three quarters of 2022, Jianghua rare earths realized operating income of 576 million yuan and net profit of 252 million yuan. The acquisition of Jianghua rare earth will fill the gap in the upstream mineral resources of the company, improve the layout of the whole industrial chain of the company's rare earth industry, and enhance the company's core competitiveness and growth potential.
China rare Earth Group is the only listed company, looking forward to the follow-up injection of high-quality assets: the actual controller of the company, China rare Earth Group currently has 72 rare earth mining enterprises and 33 rare earth smelting separation enterprises. In 2022, the total separation index of China rare Earth Group is 58500 tons of REO, accounting for 29% of the total index. China rare earths is its only listing platform. The parent company, China rare Earth Group, is expected to inject high-quality assets into the future and look forward to the subsequent injection of high-quality assets to open the ceiling of the company's growth.
Investment suggestion: considering Jianghua amalgamation and equity dilution, we expect the company to achieve operating income of 41.00 trillion yuan in 2022-2024 and return to its mother net profit of 4.36 billion yuan and 5.91 billion yuan. The PE corresponding to the closing price on February 1, 2023 is 98.60, 72.72, respectively, 57.61 times, covering for the first time, and given an "overweight" rating.
Risk tips: the risk of sharp fluctuations in rare earth prices; the risk of lower-than-expected demand downstream; and the release of lower-than-expected risks in the company's production capacity.