Event
The company released its quarterly report for the third quarter of 2023 on October 25, with revenue of 6.417 billion yuan in the first three quarters, down 14.52%, net profit of 223 million yuan, down 63.73%, and non-net profit of 206 million yuan, down 66.21%. 3Q23 realized revenue of 2.113 billion yuan, an increase of 1.15%, a net profit of 61 million yuan, a decrease of 1.6%, and a deduction of 55 million yuan for non-net profit, a decrease of 6.8%.
Comment
Q3 rare earth prices stabilized and rebounded, and the company's performance was in line with expectations. The average price of Q3 praseodymium and neodymium oxide was 490800 yuan / ton, down 1% and 34% respectively, and the price of rare earths basically stopped falling and stabilized. Q3 company's home ring fell 1.6%, deducting non-home ring down 6.8%, non-recurrent profit and loss 15 million yuan from government subsidies; gross profit margin 10.77%, 1.5pcts decline, net interest rate 3.28%, 1.86pcts decline, mainly because the price of rare earth raw materials fell sharply in Q2, but has not yet been fully transmitted to end customers, Q3 company revenue and profit is still affected. In September 23, after the capital increase of Zhaoqing Sanhuan, a subsidiary of the company, the company's shareholding decreased to 28.59%, which is no longer included in the scope of the company's consolidated statements.
The growth of the second batch of rare earth indicators is in line with expectations, and demand is expected to recover. In 23, the second batch of rare earth mining and smelting separation indicators increased by nearly 10% compared with 22 years, of which the light rare earth mining index increased by 10.1%, and the medium and heavy rare earth mining index increased by 7.1%. The overall growth rate of the index was in line with expectations. In 23, the first batch of rare earth mining targets were 120000 tons, an increase of 19.05 percent, and smelting separation products were 115000 tons, an increase of 18.21 percent, which was in line with expectations as a whole. Downstream new energy vehicles, wind power, energy-saving appliances and other fields of rare earth permanent magnet demand is expected to gradually recover.
Production capacity continues to expand, and the share of new energy sector increases. At present, the blank production capacity of the company's sintered NdFeB is 25,000 tons / year, and it is expected to reach 30,000 tons / year by the end of 24 years after Ningbo and Ganzhou investment projects are put into production. On raw materials, the company cooperates with Southern rare Earth Group to ensure supply. The downstream applications of the company's products mainly include new energy vehicles, traditional vehicles, consumer electronics, industrial robots, energy-saving household appliances, wind power and computers, and the proportion of new energy vehicles is expected to continue to increase. The company has a significant advantage in relying on the research and development of the Academy of Sciences. The "Patent license Agreement" signed with Hitachi Metal has provided support for the company to carry out large-scale international business. In the first half of 23, the company's overseas business revenue accounted for 71%, an increase of 12pcts compared with 22 years, covering North America, Europe, Southeast Asia and other major overseas markets.
Profit Forecast & Investment suggestion
According to the company's results in the first three quarters, the company's 23-25 net profit was lowered by 14%, 11% and 12% respectively. It is estimated that the company's 23-25 net profit is 346 million yuan, 535 million yuan and 629 million yuan respectively, corresponding to EPS 0.29,0.44,0.52 yuan respectively, and 36 times, 23 times and 20 times of PE respectively, maintaining the "buy" rating.
Risk hint
Raw material price fluctuation risk; downstream demand fluctuation risk; industry competition aggravating risk.