The company's performance continues to improve: benefiting from the optimization of the rare earth supply and demand pattern, rare earth prices continue to rise and remain high. The company expects to achieve net profit of 22-260 million yuan in 2022, an increase of 58.2%-86.9% over the previous year. In addition to increasing the company's own rare earth mining efforts to increase mineral sales, the company's shareholding company Guangdong Dabaoshan Mining Co., Ltd. has stepped up technological transformation to continue to achieve stable and high production, and the participating company Dongdian Chemical Company has strengthened marketing control and expanded the scale of production and sales, leading to an increase in the company's investment income.
The integration of the rare earth industry is ongoing: after the five ore rare earths were renamed China's rare earths in 2022, a new pattern of “one south, one north, one light, one heavy” rare earth has now been formed domestically, and the country's voice over rare earths continues to increase. The company announced in October 22 that it signed a strategic cooperation agreement with China Rare Earth Group, with the intention of strengthening alliances to strengthen the country's pricing power for medium and heavy rare earths. The company controls high-quality rare earth resources in Guangdong Province and will fully enjoy the profit flexibility brought about by rising rare earth products.
The company's self-sufficiency in rare earth mines is expected to increase further: the company currently owns two of its own rare earth mines, the Pingyuan Renju Rare Earth Mine and the Dapu Wufeng Rare Earth Mine. The holding subsidiary Xinfeng Company owns mining rights for the Zuokeng rare earth mine, and the company's total resource reserves have reached 124,000 tons. Among them, the Xinfeng Zuokeng Mine, for which the company obtained a mining license in July 22, is currently the largest monomer ion adsorption rare earth mine in China. It is expected to be completed and put into operation in 2024. The company currently has a rare earth separation capacity of 14,000 tons/year, and the increase in self-sufficiency ratio will further increase the company's profitability.
The company's fundraising project is progressing smoothly: as of the latest announcement, the company's fund-raising project “8,000 tons of high-performance NdFeB permanent magnet material project” has completed the first phase (2,000 tons) of project construction and equipment installation and commissioning. The conditions for input and trial production have been met, and it has entered the trial production stage. The construction, relocation and upgrading of the “Fuyuan Company's annual processing of 5,000 tons of Zhongytang Fuyuan Hybrid Rare Earth Mine Relocation and Upgrading Project” has completed construction, relocation and upgrading work. The smooth progress of the fund-raising project further deepened the company's upstream and downstream barriers, laying the foundation for the company's high-quality development.
Profit forecast and investment advice: We expect that after rare earth prices stabilize, the company's performance will be released steadily as the mine self-sufficiency rate increases. We expect 2022-2024 revenue of 239.3/32.05/3975 billion yuan, net profit of 241/451/61 billion yuan, and PE valuation of 58/31/23 times, giving it a “buy” rating.
Risk warning: The price of rare earths has declined sharply, demand for rare earths has fallen sharply, the release of production capacity from the company's own mines fell short of expectations, the company's rare earth indicators fell short of expectations, etc.