Event: according to the company's 2023 semi-annual report, 2023H1 achieved revenue of 2.127 billion yuan, down 3.36% from the same period last year; net profit from its mother was 45.3051 million yuan, down 85.13% from the same period last year; and 4329.98 yuan was deducted from non-return net profit, down 85.58% from the same period last year. 2023Q2, the company achieved revenue of 646 million yuan, down 34.93% from the same period last year, down 56.37% from the same period last year; the net profit from the home was 25.84 million yuan, down 81.08% from the same period last year, and increased by 32.74% from the same period last year; and the net profit from non-return was 24.19 million yuan, down 81.71% from the same period last year and 26.52% from the previous year.

Inventory price reduction decreased, Q2 net profit increased month-on-month. 2023H1 achieved revenue of 15.77 yuan and 539 million yuan respectively from rare earth oxides and rare earth metals, accounting for 74.12% and 25.36% of revenue respectively, accounting for 74.12% and 25.36% of revenue, respectively, and gross profit margins of 15.81% and 4.21%, respectively, compared with the same period last year. 2023H1's rare earth oxides and rare earth metals respectively achieved revenue of 15.77% and 539 million yuan, respectively, compared with the same period last year. The price of some rare earth commodities of the company decreased year-on-year. The decline in 2023H1 home net profit far exceeded the decline in revenue, mainly due to the company's provision for inventory decline, resulting in asset impairment of-195 million yuan, an increase of 184 million yuan compared with the same period last year. Q2's revenue dropped by 56.37% month-on-month, and we believe that the continuous decline in rare earth prices in 2023 led to a continuous decline in the price of the company's rare earth products (according to Baichuan Yingfu, 2023Q1, Q2 praseodymium and neodymium oxide prices are 66.63 yuan / ton and 482,000 yuan / ton, respectively, down 27.66% from the previous month; terbium oxide prices Q1 and Q2 are 1235.16 and 856.25 million yuan / ton, respectively, a month-on-month drop of 30.68%). The increase in Q2 homing net profit from the previous month is mainly due to the impairment loss of assets (mainly prepared for inventory decline) by 61.61 million yuan to-60.8158 million yuan (Q1 is-12815.58 million yuan).

The company actively promotes the work of resource guarantee. ① company issues shares to specific objects to finance the acquisition of the rare Hunan mine project in an orderly manner. The net profit of Hunan in 2022 is 341 million yuan. Equity injection will greatly increase the performance of the company. Hunan has estimated recoverable reserves of 12.9924 million tons, rare earth oxides of 14200 tons, and designed annual production capacity of 1840 tons of REO. The company plans to start the construction of magnesium salt process with a capacity of 1000 tons per year in 2024. According to the evaluation report, the mine will be in service until March 2028; Zhongshi Yongzhou, a subsidiary of Zhongshi Hunan, has already started the technical transformation of rare earth separation of 5000 tons of REO/, which is expected to be put into trial production by the end of this year and reach production by 2025. ② Gannan rare earth mine upgrading and reproduction achieved positive results ③ in addition, the exploration rights of Shenggongzhai rare earth mine and Feitian rare earth mine held by the company are actively carrying out exploration and conversion mining, and the geological environment protection and land reclamation plan of Shenggongzhai rare earth mine has passed the examination of the Ministry of Natural Resources.

Profit forecast: we expect the company's net profit from 2023 to 2025 to be 2.30,4.89 and 702 million yuan, EPS 0.23,0.50,0.72 yuan per share, and the PE corresponding to the closing price on August 30 are 123x, 58x and 40x respectively.

Risk hint: China thin Hunan acquisition is not as expected, the price of rare earths continues to fall.