A global rare earth leader that continues to grow. According to the Ministry of Industry and Information Technology, the company's separation index increased from 63,800 tons to 163,200 tons in 20-23, and the three-year CAGR was 37%, accounting for 67% of the total domestic target, accounting for about 40% of the total global output. Supported by the resources of Baiyun Ebo Rare Earth Mine, the company's output will continue to grow in the future as the company's 106,700 tons/year green smelting upgrade project is put into operation.

Related procurement guarantees the flexibility of the company's performance. According to the company-related procurement pricing formula, the company can maintain the gross profit level of rare earth REO by smelting and separating rare earths from Baogang Co., Ltd., and the profit flexibility may be greater than the price elasticity of oxides, so the company can still be regarded as a resource stock.

Prices of rare earths rise and fall easily. Demand: We expect carbon neutrality to drive the growth rate of rare earth demand to reach 10% in 23-25, with a corresponding rare earth REO increase of about 3-4 million tons/year; supply: the Tanzania project, which mainly focuses on resources and the increase in separation capacity for rare earths, both of which together contribute about 140,000 tons of REO growth. We believe there will be a shortage in the tight balance between rare earth supply and demand in the next 3 years, and the price center is expected to move upward.

Profit forecasting and investment advice. We assume that the company's rare earth indicators increased 15%/15% year on year in 24/25, and that the concentrate pricing logic did not change qualitatively. In 23/24/25, the company's EPS was 0.54/0.80/0.95 yuan/share, respectively. According to the closing price on January 10, the corresponding PE valuation was 34/23/19 times, respectively. Company highlights: 1. Rare earth prices rise and fall easily, and the industry cycle trend is upward; 2.

Relying on the rich resources of Baiyun Ebo, the sustainability of the company's growth can be expected; 3. The extension of deep processing will increase the company's valuation. Taking into account the scarcity of rare earth resources and the value of strategic resources, we believe that it is reasonable to give the company a 24-year 30-fold PE valuation, corresponding to a reasonable value of 24.03 yuan/share for the company's stock, giving the company a “buy” rating.

Risk warning. Risk of demand falling short of expectations and supply exceeding expectations; risk of changes in concentrate pricing models.