23Q3 achieved a net profit of 74 million yuan and maintained its "buy" rating.
23Q1-3 realized revenue of 13.107 billion yuan (yoy+1.77%) and net profit of 158 million yuan (yoy-89.35%); 23Q3 revenue of 4.549 billion yuan (yoy+10.51%,qoq+21.17%) and net profit of 74 million yuan (yoy-46.22%,qoq+1024.76%). Considering the lower-than-expected profitability of the company's products, we reduce the gross profit margin assumption of rare earth products for 23-25 years, and estimate that the company's EPS 0.17 pound 0.43 won 0.68 yuan (the previous value 0.23 pound 0.57 pound 0.70 yuan). Comparable company 2024PE average 29.1X, give the company 29.1x PE (2024E), corresponding to the target price of 12.61yuan (previous value 14.14yuan), maintain the "buy" rating.
Rare earth production and sales increased revenue, but profitability decreased and profit thinned. According to the company's third-quarter report for 23 years, the company's 23Q1-3 revenue increased compared with the same period last year, mainly due to an increase in sales of the company's major rare earth products. The output of rare earth oxides, rare earth salts, rare earth metals, zircon sand, ilmenite (containing rutile) and rare earth concentrate (containing monazite) of 23Q1-3 is 1.23,5.90,1.24,2.10,6.39 and 16600 tons respectively, compared with the same period of last year. The sales volume was 0.95,1.10,1.03,1.82,5.18 and 35000 tons respectively, which was + 24, + 87, + 56, + 91, + 535 and-24% compared with the same period last year. However, profits declined in the same period compared with the same period last year, mainly due to lower prices of major rare earth products and lower gross profit margin. 23Q1-3 company gross profit margin 5.23%, year-on-year-13.49pct.
The price of rare earths fell steadily in July 2023
According to the Wind,2021 to the first half of 2022, the price of rare earths is on an upward trend, which we believe is mainly due to the explosive growth of new energy vehicles, as well as energy-saving frequency conversion air conditioners, wind power and other new energy industries. Prices of rare earths began to fall from the second half of 2022 to June and stabilized in July. We believe that prices have fallen mainly because of increased supply and relatively weak demand affected by macroeconomic and other factors. At the same time that the second batch of rare earth mining and smelting separation indicators were issued in 2023, the notice proposed that the number of annual indicators would be finally determined taking into account factors such as changes in market demand and the implementation of indicators of various rare earth groups, and that supply and storage regulation and control may be possible.
The company actively expands the source of rare earth raw materials.
The cooperation between the company and MP of the United States is stable. At present, the annual output of MP rare earth concentrate is about 43000 tons, most of which are underwritten by the company. The company's current underwriting agreement with MP covers not only rare earth concentrates, but also oxide products. The company signed an underwriting agreement with Peak rare earths, agreeing that the company would buy 100 per cent of rare earth concentrates produced by the Ngualla project, expected to be completed in 2026, at least 50 per cent of intermediate rare earth products or eventually separated rare earth oxides. In addition, the company has also laid out the business of rare earth magnetic waste recovery and monazite mineral processing.
Risk tips: sharp fluctuations in raw material prices led to impairment losses of 198 million yuan, downstream demand is not as expected.