Guangsheng reported a loss in Nonferrous and reduced its loss in the second quarter.
In the first half of 2016, the company achieved revenue of 1.316 billion yuan, down 6.67% from the same period last year; the net profit returned to its mother was-101 million yuan, a substantial increase in losses compared with the same period last year. The company's large losses are mainly affected by a sharp drop in rare earth prices, with the average price of rare earths falling by about 25% in the first half of this year compared with last year, and the industry is facing difficulties.
But it should also be noted that the company's financial situation is showing signs of improvement. The company's sales expenses have dropped by nearly 40% compared with the same period last year, and management expenses have dropped by nearly 10%, reflecting the company's efforts to control fees and improve efficiency. In addition, in the second quarter alone, the company reduced its losses on a year-on-year basis.
According to the current standard of national reserves, the expected collection and storage is still in place.
The collection and storage of rare earths continued to ferment in the first half of the year: on March 30, 2016, the NDRC held a mobilization meeting for commercial storage of rare earth enterprises; on June 7, the State Reserve convened six major groups to hold the first state reserve bidding meeting, but all failed to bid because the tender price was not approved by the rare earth group. At present, the State Reserve is in a stalemate, and the focus of the contradiction is not "whether you want it or not", but at "what price", so it is expected that the State Reserve is still there, and a second tender is still possible.
Rare earth cycle reverses, gang up is still the key.
At present, the illegal mining of rare earths may still reach 60% of the legal output, and the problem of black ore is still serious. China has set up six major rare earth groups and strengthened industry management. Remarkable achievements have been made in 2016. 22 of the country's 23 rare earth mines have entered the group, 40 of the 99 smelting separation enterprises have been closed, and 54 of the remaining 59 have joined the group.
Profit forecast and investment suggestion
Guangsheng Nonferrous is the international leader of medium and heavy rare earths, and its performance is highly flexible to the price of rare earths. The price of rare earths bottomed out in the second half of last year, has gone through a year of consolidation and is now basically near the company's production costs. We estimate that if the price of rare earths can rebound by 20% in the second half of the year, the company will hopefully turn around. At present, the industry concentration has been high, downstream new energy vehicles, motors and other emerging demand is strong, it is now dark before dawn, if there is a pullback in the company's share price, it will be an opportunity to layout ahead of time. Give a "recommended" rating.
Risk hint
1. The advance of the State Reserve fell short of expectations.
2. The anti-gang effect is not up to expectations.
3. The price of rare earths fell sharply.
