Items:
The company released its three-quarter report in 2023, with a total operating income of 979 million yuan (+ 1.18% year-on-year), a net profit of 80 million yuan (+ 26.59%) and a net profit of 79.8 million yuan (+ 27.86%) in the third quarter of 2023. In the first three quarters, the company achieved revenue of 3.106 billion yuan (year-on-year-1.97%), net profit of 126 million yuan (year-on-year-65.89%), and non-return net profit of 123 million yuan (year-on-year-66.06%).
Peace viewpoint:
The price of rare earths rebounded overall, and the net interest rate improved compared with the previous month. According to Baichuan Yingfu, the average price of Q3 praseodymium and neodymium oxide was 486700 / ton, up 1.0% from the previous month; dysprosium oxide 2.3945 million / ton, up 16.8% from the previous month; terbium oxide 7.7496 million / ton, down 9.5% from the previous month, and the price of medium and heavy rare earths showed an overall upward trend. The net profit rate of Q3 company is 8.25%, which is a significant improvement compared with the previous month.
The injection of high-quality assets is imminent, and the layout of resources will be improved at an accelerated pace. The company plans to issue a fixed increase project to raise 2.097 billion yuan, of which 1.497 billion yuan will be used to acquire 94.67% of the shares held by China rare Earth Group Industrial Development Co., Ltd. (formerly Minmetals rare Earth Group Co., Ltd.). Its China rare Earth Mine Project is the largest single ionic rare earth mining project in China, with a production scale of 3.02 million tons per year. After the injection of the project, the layout of the upstream resources of the company will be further improved, and the degree of integration of the industrial chain will be accelerated. At present, the fixed increase project has been approved.
The growth rate of rare earth index is slowing down as a whole, and the share of medium and heavy rare earth index is highly concentrated. In 2023, the second batch of rare earth mining and smelting separation targets were issued, and the total amount control targets of mining and smelting separation were 120000 tons and 115000 tons respectively, an increase of 9.9% and 9.7% respectively over the same period last year, which showed a slowdown compared with the first half of the year. Throughout the year, the total amount of heavy rare earths remained unchanged, while the index of light rare earths increased by 15.7% over the same period last year, with the growth rate slowing by 12.5 percentage points. The share of medium and heavy rare earths index is still highly concentrated, and the heavy rare earth mining index of China rare Earth Group Co., Ltd. accounts for about 68%, which is the same as the same period last year.
Relying on China rare Earth Group, it is expected to fully benefit from the integration of group resources and accelerate the improvement of the layout of the industrial chain.
According to the letter of commitment issued by China rare Earth Group to avoid inter-industry competition, the relevant rare earth business assets belonging to the group may continue to be promoted, and the company, as the group's only listing platform, is expected to continue to benefit from the group's high-quality rare earth industry assets and enter a new stage of rapid development.
Investment suggestion: with the steady progress of the company's mine project injection, further consolidation of resource security, rare earth prices are expected to continue to improve under the pick-up demand, we are optimistic about the company's long-term competitiveness, maintain the previous performance forecast (September 1, 2023 report forecast), 2023-2025 operating income is 43.05,46.88, 5.911 billion yuan, return to the mother net profit of 2.38,5.20, 704 million yuan. The corresponding PE is 119.6, 54.8,40.5 times, maintaining the "recommended" rating.
Risk tips: (1) the progress of the project is not as expected and the profit growth of the company is not as expected. If the progress of the current project under construction is slower than expected, it may affect the pace of future performance growth of the company. (2) the downstream demand is lower than expected. If affected by the terminal new energy vehicles, the demand shrinks to a large extent, and the company's product sales may be affected to a certain extent.
(3) the price of rare earths has dropped sharply. If the price of rare earth products falls sharply, it may put pressure on the company's performance.