Event: on November 1, 2022, Guangsheng Nonferrous announced that the company received notice from indirect controlling shareholder Guangsheng Group on October 31: Guangsheng Group and China rare Earth Group Co., Ltd. signed the Strategic Cooperation Framework Agreement. The two sides will carry out in-depth exchanges and cooperation in the rare earth industry, scientific research, talent and other fields, and accelerate the strategic coordination between the central and local governments through resource integration and industrial complementarity. Jointly promote the high-quality development of China's rare earth industry.

Rare earth integration is imperative, strong and strong join hands to enhance the bargaining power of products. Guangsheng Nonferrous and China rare Earth are both leading enterprises of medium and heavy rare earths. The strong alliance between Guangsheng Group and China rare Earth Group is not only another major measure after the strategic restructuring of China's rare earths, but also a phased milestone in the integration of the rare earth industry. Rare earth is a national strategic resource, the accelerated integration of rare earth resources will effectively enhance the concentration of the industry, strengthen the say on the price of rare earth products, promote the healthy development of the upstream and downstream industrial chain and promote the rapid improvement of the performance of plate companies.

Projects under construction are progressing smoothly, and resources are thickened to ensure future development performance. On October 31, Guangsheng Nonferrous announced its results for the third quarter of 2022. In the first three quarters of 2022, the company achieved a total operating income of 18.375 billion yuan, an increase of 64.80% over the same period last year, and a net profit of 212 million yuan belonging to shareholders of listed companies, an increase of 66.36% over the same period last year. In recent years, the company fully excavates the existing mines and speeds up the acquisition of high-quality mineral projects inside and outside the province to ensure its own resource reserves and mineral supply. At present, the company has two self-owned rare earth mines, Pingyuan Renju rare Earth Mine and Dapu Wufeng rare Earth Mine, and the holding subsidiary Xinfeng Company has the mining right of Zuokeng rare Earth Mine, with a total resource reserves of 124400 tons. At the end of September, Fuyuan Company, a fund-raising project, handled 5000 tons of yttrium and europium-rich rare earth ore separation production line annually. The remote relocation and upgrading project has been completed as planned, and the separation production line has been fully launched and officially put into trial production. Holding subsidiary Guangdong Shengyuan annual production of 8000t/a high-performance NdFeB permanent magnet project has completed the preparatory work, the first batch of 3000 tons of magnetic materials is expected to be put into production by the end of this year. The company's resource supply capacity continues to be guaranteed, laying a solid foundation for future performance development.

With the advent of the peak demand season, rare earth prices have stabilized and rebounded. As of October 31, the rare earth price index closed at 277.19, unchanged from early October and up nearly 20:00 from early September. The price of praseodymium and neodymium oxide closed at 653 yuan / kg, up 36 yuan from early September, dysprosium oxide closed at 2295 yuan / kg, up 115 yuan from early September, and terbium oxide closed at 13325 yuan / kg, up 375 yuan from early September. The prices of mainstream rare earth products continue to pick up and have tended to run smoothly at present. The new energy properties of rare earths have been continuously strengthened, and the plate is expected to stabilize and pick up in the fourth quarter with the arrival of the traditional sales season in industries such as downstream new energy vehicles.

Investment advice: the company's resource security capacity continues to improve, key projects smoothly put into production, with rare earth prices stabilizing and rebounding, the company's rare earth business is expected to usher in a simultaneous rise in volume and price. It is estimated that the company's basic earnings per share from 2022 to 2023 are 0.79 yuan and 1.50 yuan, and the current stock price is 76.64 times and 40.52 times corresponding to PE, maintaining the recommended rating.

Risk tips: the risk of macroeconomic fluctuations; the risk of lower-than-expected demand for rare earths and magnetic materials; the risk of fluctuations in rare earth prices; the risk of poor progress in project bidding; and the risks of production safety and environmental protection.