A leading rare earth permanent magnet enterprise controlled by the Chinese Academy of Sciences. The company focuses on the production and sale of sintered and bonded NdFeB, accounting for more than 95% of revenue. The actual controller is the Chinese Academy of Sciences, and production bases are mainly located in Ningbo, Tianjin, Beijing, Shanghai and Ganzhou. 23 In the first half of the year, the company achieved revenue of 4.304 billion yuan, a year-on-year decrease of 8.50%; realized net profit of 163 million yuan, a decrease of 59.86%. Mainly due to falling demand and falling rare earth prices, the company's asset impairment loss reached 69 million yuan, an increase of 152%. In February '22, the company distributed 150 million shares at a rate of 1.5 shares for every 10 shares at a price of RMB 4.5 million per share, with a subscription amount of 677 million yuan for base renovation and expansion projects in Ningbo and Ganzhou.
Short-term prices of rare earths are under pressure, and there is broad scope for medium- to long-term demand. Demand for NdFeB continues to grow in fields such as new energy vehicles, wind power, energy-saving appliances and elevators, and robots. We expect global demand for high-performance NdFeB to exceed 200,000 tons in '25, and 3-year CAGR = 20.5%. The first batch of rare earth mining targets in '23 was 120,000 tons, an increase of 19.05%; 115,000 tons of smelting and separation products, an increase of 18.21%. 23 The first half of the year was affected by a decline in demand. The price of praseodymium oxide has dropped by more than 30% from the beginning of the year to now, and has steadily rebounded since July. Currently, praseodymium oxide is 490,000 yuan/ton. The third quarter focuses on the release of the second batch of indicators. It is expected that prices will mainly fluctuate in the short term, and the medium-term price is expected to be 400,000,000 per ton. China accounts for more than 90% of the world's rare earth permanent magnet production. The capital threshold and technical barriers for high-end products are high. Leading enterprises are actively expanding production, and concentration will further increase.
Overseas markets are expanding at an accelerated pace, and the share of the new energy sector has increased. Currently, the company's sintered NdFeB blank production capacity is 25,000 tons/year. After the Ningbo and Ganzhou fund-raising projects are put into operation, it is expected to reach 30,000 tons/year by the end of the 24th. In terms of raw materials, the company cooperates with Southern Rare Earth Group and others to guarantee supply. Downstream applications of the company's products mainly include fields such as new energy vehicles, traditional automobiles, consumer electronics, industrial robots, energy-saving appliances, wind power, and computers. 23 The share of new energy vehicles continued to increase in the first half of the year. The company relies on the Academy of Sciences for significant R&D advantages. The “Patent License Agreement” previously signed with Hitachi Metals provided support for the company to develop large-scale international business. 23 In the first half of the year, the company's overseas business revenue accounted for 71%, an increase of 12 pcts over '22, covering major overseas markets such as North America, Europe, and Southeast Asia.
Profit forecasts, valuations, and ratings
The company's revenue for 23-25 is estimated to be 8.065 billion yuan, 9.583 billion yuan, and 10.211 billion yuan respectively; net profit to parent is 400 million yuan, 601 million yuan, and 713 million yuan respectively; EPS is 0.33 yuan, 0.50 yuan, and 0.59 yuan; PE is 34 times, 22 times, and 19 times. It was granted 25 times PE in 24 years, corresponding to a market value of 15.025 billion yuan, and a target price of 12.38 yuan/share. For the first time, it covered the “buy” rating.
Risk warning
Risk of fluctuations in raw material prices; risk of fluctuations in downstream demand; risk of increased competition in the industry; risk of exchange rate fluctuations; risk of dependence on international markets.