The development of the company has entered a new stage. In recent years, in order to effectively protect and make rational use of rare earths and other related resources, and standardize the market order of the industry, the state continues to strengthen the supervision and management of the rare earth industry and enterprises, so as to promote the sustained and healthy development of the rare earth industry. Under the background of a series of policies such as rare Earth regulations and rare Earth regulations, in December 2021, Aluminum Corporation Of China Ltd Group Co., Ltd., China Minmetals Group Co., Ltd., Ganzhou rare Earth Group Co., Ltd., introduced China Steel Research Technology Group Co., Ltd., Youyan Technology Group Co., Ltd., established China rare Earth Group. After the establishment of China rare Earth Group, the concentration of rare earth mining and total production control indicators has been further improved, the long-term "many, small, scattered" situation of the rare earth industry will be further reversed, and the development of the industry will enter a new pattern. With the initial results of the country's standardized management of the rare earth industry, the rapid development of new energy materials, wind power generation and other fields, vigorously promote the continuous implementation of the concept of innovation and upgrading of the rare earth industry, as well as the establishment of China's rare earth group, the rare earth industry has made considerable progress, and China's rare earth industry is entering the track of healthy development in an orderly manner.

Affected by some factors such as the rise in rare earth prices, the company maintained rapid revenue and profit growth in the first three quarters. The company achieved steady growth in revenue and profit in the first three quarters of 2022. In the first three quarters of 2022, the company's operating income was 3.169 billion yuan, an increase of 58.21% over the same period last year. It realized a net profit of 368 million yuan, an increase of 85.99% over the same period last year, and a net profit of 363 million yuan, an increase of 87.30% over the same period last year. In the third quarter of 2022, the company's operating income was 968 million yuan, an increase of 125.72% over the same period last year; the net profit was 63 million yuan, an increase of 122.50% over the same period last year; and the non-return net profit was 62 million yuan, an increase of 129.34% over the same period last year. By tracking and analyzing market fluctuations and industry development trends, the company adopts such ways as organizing production raw material reserves and establishing procurement channels for various kinds of raw materials, to better ensure the high quality and stable supply of rare earth raw materials and to reduce the risk of raw material price fluctuations to a certain extent. According to the total production control index issued by the national competent department, the company integrates the current market situation and the technical advantages of the separated enterprises, and implements the annual production and operation plan within the quota requirements. At the present stage, the key production enterprises affiliated to the company basically carry out production according to the production capacity and total quantity index, and all the management work is carried out in a normal and orderly manner.

The company intends to issue a fixed increase to acquire a 94.56% stake in Jianghua rare earths. On December 31, 2022, the company announced that it planned to issue A-shares in a non-public offering, raising a total of no more than 2.03 billion yuan to acquire 94.67 percent of Jianghua rare earths held by Minmetals rare Earth Group and to supplement its working capital. the amount of funds to be raised is 1.43 billion yuan and 600 million yuan respectively. If the fixed increase is successfully completed, the company's rare earth mining and smelting separation integration will be further improved, and the core competitiveness of the production and extraction industry will be improved. The Jianghua rare earth mine project under Minmetals rare Earth Group has entered the production process. Yingjiang Jiahua rare earth mine is the largest mining project of single ionic rare earth mining index in the country, and it is the first ionic rare earth mine in the "national green mine pilot unit". The rare earth mine in Jianghua County has a production scale of 3.02 million tons per year and a mining area of 11.7436 square kilometers, valid from June 17, 2015 to June 17, 2024. After Jianghua rare earth obtained the exploration right of Jianghua rare earth mine, it carried out a resource reserves evaluation and record. According to the geological research of Hunan Province in June 2011, the reserve of rare earth ore (TR2O3) in the first stage mining area was 37890 tons, mining loss was 5641 tons, and a total of 43531 tons were identified. As of August 31, 2010, the reserves of rare earth resources within the scope of the mining license for Phase I mining area of Guposhan Mining area, Jianghua Yao Autonomous County, Hunan Province are as follows: rare earth ore, ore volume 3542,104 tons, rare earth oxide content (REO) 37890 tons, rare earth grade (REO) 0.11%. It is expected that after the injection of Jianghua rare earth equity, the construction of mines and supporting projects will be accelerated with the help of the platform of listed companies, so as to promote the overall high-quality development of the company's rare earth industry; in addition, this acquisition will help the controlling shareholders and actual controllers to fulfill their commitment to resolve inter-industry competition.

Give the company an investment rating of "overweight". It is estimated that the fully diluted EPS of the company in 2022, 2023 and 2024 is 0.45,0.47 and 0.49 yuan, respectively. According to the closing price of 38.51 yuan on January 20, the corresponding PE is 85.64,81.46 and 79.39 times, respectively. The company continues to optimize the company's capital structure, continuously improve the company's industrial chain, enhance the company's core competitiveness, and the downstream demand for new energy materials, wind power, industrial robots, energy-saving appliances, efficient motors and other industries is steadily increasing. The company's revenue and profits are expected to continue to grow. At present, the company's valuation level is relatively reasonable, combined with the development prospects of the industry and the company's industry status, covering for the first time, giving the company an "increased" investment rating.

Risk hints: (1) the Fed raised interest rates more than expected; (2) the international macroeconomic downturn; (3) geopolitical conflicts intensified; (4) changes in industry policies; (5) sharp fluctuations in rare earth prices; (6) lower-than-expected downstream demand; (7) lower-than-expected capacity supply.