Incident: The company released its 2022 annual report and the first quarter report of 2023. In 2022, the company achieved revenue of 3.786 billion yuan, +27.33% year on year, net profit of 416 million yuan, +112.70% year on year, after deducting net profit of 410 million yuan from non-return to the mother, +116.65% compared to the previous performance forecast, which was above the median value of the previous performance forecast. 2023Q1 achieved revenue of 1,481 million yuan in a single quarter, +22.60% year-on-year, net profit of 19 million yuan, -88.42% year-on-year, after deducting net profit of 19 million yuan from non-return mothers, and -88.62% year-on-year.
Higher prices of rare earth commodities contributed to a significant increase in the company's performance in 2022. In 2022, the company achieved a gross profit margin of 17.06%, a year-on-year increase of +4.38pct, and a net profit margin of 11.24% and a year-on-year +4.3pct. The market prices of some of the company's rare earth products increased significantly compared to the same period last year, and the overall profit level increased greatly compared to the same period last year. 2023Q1's sales volume increased over the same period last year, and revenue increased; 2023Q1 calculated asset impairment losses of 128 million yuan, compared to 55 million yuan in the same period last year, mainly due to the decline in rare earth product prices, and preparations for inventory price reductions increased compared to the same period last year.
Strengthen resource security capabilities and promote the extension of the industrial chain upstream. In 2022, the company officially launched a capital operation project to finance the acquisition of 94.67% of the shares held by Minmetals Rare Earth Group in Zhongxi Hunan. Zhongxi Hunan is the mining project with the largest single ionic rare earth mining index in the country. It is the first ionic rare earth mine in the “National Green Mine Pilot Unit”, with a mining area of 11.74 square kilometers and a production scale of 3.02 million tons/year. The project will further increase the company's net profit, enhance the company's profitability, strengthen the resource-side security of listed companies, and strengthen their position in the rare earth industry.
Investment advice: As the only listing platform for China Rare Earth Group at this stage, the company's total control plan indicators for medium and heavy ion rare earth smelting and separation obtained in recent years rank among the highest in the industry, with remarkable advantages. We expect the company's net profit to be 494, 574, and 652 million yuan respectively in 2023-2025, and EPS of 0.5, 0.59 and 0.66 yuan respectively, and the corresponding PE is 67.07, 57.75 and 50.85 times respectively. It was covered for the first time and given a “recommended” rating.
Risk warning: macroeconomic fluctuations and risks of industrial policy changes; raw material supply risks; downstream demand falls short of expectations.