Event: on October 23, 2023, the company released its third quarterly report for 2023. In Q1-3 in 2023, the company achieved revenue of 4.627 billion yuan, an increase of 1.5% over the same period last year, a net profit of 368 million yuan, an increase of 20.5% over the same period last year, and a net profit of 354 million yuan, an increase of 20.25% over the same period last year. 2023Q3, the company achieved revenue of 1.469 billion yuan, down 18.5% from the same period last year and 17.5% from the previous year; the net profit from the home was 127 million yuan, up 28.3% from the same period last year and 2.5% from the previous year; and deducting the non-return net profit of 120 million yuan, up 24.1% from the same period last year and 0.5% from the previous year. The performance is in line with our expectations.

The net profit of 2023Q1-3 increased by 62.54 million yuan compared with the same period last year, mainly due to the increase in gross profit by 206 million yuan, while the increase in gross profit was mainly due to the increase in production and sales. ① price: the price of 2023Q1-3 metal praseodymium and neodymium decreased by 38.8% to 656,000 yuan / ton compared with the same period last year, and the price of the company's products also fell. ② quantity: with the full production capacity of the first phase of the first phase of Nantong base, the company has achieved an annual production capacity of 24000 tons of NdFeB blank, thanks to the increase in production capacity, NdFeB sales in the first three quarters of 2023 may have a large increase compared with the same period last year. ③ gross margin & net margin: 2023Q1-3, company gross margin / net margin increased by 4.26/1.24pct to 18.03% and 7.99% respectively compared with the same period last year. Or mainly due to the decline in prices brought about by the denominator reduction. ④ expense side: 2023 Q1-3 four fees increased by 125 million yuan compared with the same period last year, of which R & D expenses and financial expenses were the main increase points, with an increase of 4064 million yuan respectively compared with the same period last year. The increase in R & D expenditure is mainly due to the company's continued increase in R & D investment, and the increase in financial expenses is mainly due to the increase in interest on convertible bonds in 2023.

In a single quarter, the net profit of home ownership increased by 28.3% compared with the same period last year, an increase of 2.5% compared with the previous quarter. ① price: the price of 2023Q3 metal praseodymium and neodymium decreased by 33.4% compared with the same period last year, up 1.6% from the previous month to 586,000 yuan / ton, and the price of the company's products also fell. ② volume: with the release of production capacity, production has a large increase compared with the same period last year, month-on-month or little change. ③ gross profit margin & net profit margin: 2023Q3, the company's gross profit margin / net profit margin increased by 2.83pct/1.70pct on a month-on-month basis, and increased by 7.02/3.21pct to 19.51% and 8.66% respectively. Or mainly due to the decline in prices brought about by the denominator reduction. ④ expense side: Q3 four fees increased by 20.11 million yuan compared with the previous month, mainly due to the increase of 24.03 million yuan in financial expenses, or due to the increase in interest on convertible bonds. ⑤ asset impairment: as the price of Q3 rare earth does not fluctuate much, Q3 company only provides for an impairment loss of 3.21 million yuan, a month-on-month decrease of 25.66 million yuan, which is the main profit increase item.

Core focus: ① capacity continues to expand. At present, the company has an annual production capacity of 24000 tons of NdFeB blanks, and the company plans to reach a production capacity of 36000 tons by 2026 according to downstream demand. ② has excellent raw material guarantee ability. In 2022, the production capacity of the joint venture between the company and Minmetals rare Earth Group of China rare Earth Group will be expanded by 200%, fully ensuring the supply of raw materials for the company.

Investment suggestion: taking into account the decline in rare earth prices, we downgrade the company's profit forecast. It is estimated that the company's net profit from 2023 to 2025 will be 4.98 million yuan and 0.78 billion yuan per share respectively. The net profit of the company will be 4.98 million yuan and 0.78 billion yuan per share respectively. The PE corresponding to the closing price on October 23 is 18max 14max 12X, maintaining the "recommended" rating.

Risk tips: the risk of rare earth raw material price fluctuations, project construction and production is not as expected, the risk of intensified competition in the industry, and so on.