China heavy rare Earth leading company, the only listing platform of China rare Earth Group. Since its establishment, the company has focused on the operation of the rare earth industry, mainly engaged in the production and operation of medium and heavy rare earth raw ore processing and rare earth oxides and other products, as well as rare earth technology research and development services. Among them, rare earth oxides are the company's core products, accounting for more than 85% of revenue in 2022. The company's equity is concentrated, backed by China rare Earth Group, and the ultimate controller is SASAC. As the only listing platform of the group, the company is expected to further undertake the integration of rare earth resources and improve the layout of the rare earth industry chain in the future.
Rare earth industry: the rigid pattern of supply is optimized and the demand continues to rise. Supply side: the rigid pattern of supply is continuously optimized, and China's resource endowment is outstanding. In 2022, the total reserves / mining volume of rare earth minerals in the world is 13,000,300,000 tons respectively, and the reserves / mining volume of rare earth minerals in China accounts for 33.85% and 70% respectively. At present, China's rare earth industry has entered a new stage, the pattern of heavy in the south and light in the north is formed, the supply is rigid under the quota system, and the increment is mainly light rare earths. Demand side: widely used, rare earth permanent magnet growth potential energy is sufficient. Rare earth functional materials can be further divided into magnetic materials, catalytic materials, luminescent materials, hydrogen storage materials and polishing materials, among which the demand for rare earth permanent magnet materials in China / the world accounts for 42% and 25%. Rare earth permanent magnet material has become the core functional material of energy saving and green environmental protection, is an indispensable element of automation and intelligence, and has a broad space for development. It will continue to play an important role in new energy vehicles, new energy power generation, industrial robots and other fields.
Company: the injection of group resources is gradually realized. China rare Earth Group is rich in rare earth mine resources and smelting separation capacity, while further integrating rare earth resources. The company relies on China rare Earth Group, benefiting from the tilt of high-quality rare earth resources, further replenishing rare earth mine resources and improving the industrial chain, among which the mine resources mainly include: 1) injection of rare earth ore in Jianghua County, 2) re-production of rare earth ore in southern Jiangxi, 3) exploration and conversion of rare earth ore in Shenggongzhai and Feitian, etc.; the new smelting separation end project includes Xinghua new material 5000t/a rare earth separation and processing project.
Investment advice. As a domestic leader in medium and heavy rare earths, the Group's injection of high-quality rare earth resources has been gradually realized, and the long-term scarcity and high growth prospects of medium and heavy rare earths will contribute to the continued release of performance. We estimate that the company's homing net profit for 2023-2025 will be 426 million yuan, respectively, an increase of-71.3%, 180.9% and 27.2% respectively over the same period last year. The corresponding PE is 234.4X/83.5X/65.6X, which is covered for the first time and given a "buy" rating.
The risk suggests that rare earth prices fluctuate sharply. The injection of resources and the investment of new capacity are not as expected.