Core views:
Net profit to mother in 23Q3 fell 46% year on year, up 1025% month on month, and the results were in line with expectations. According to the company's three-quarter report, 23Q1-Q3 achieved revenue of 13.107 billion yuan, a year-on-year increase of 1.8%, and realized net profit to mother of 0.158 billion yuan, a year-on-year decrease of 89.4%. Q3 achieved revenue of 4.549 billion yuan, up 10.5% year on year and 21.2% month on month; net profit to mother was 0.074 billion yuan, down 46.2% year on year, up 1024.8% month on month; net cash flow from operating activities was 0.507 billion yuan, -0.522 billion yuan in the same period last year, and -0.191 billion yuan in 23Q2; balance ratio was 34.2%, down 0.34 PCT from the beginning of the year. Overall performance was in line with expectations.
In 23Q3, the prices of praseodymium and dysprosium increased month-on-month, while terbium prices fell month-on-month. According to Wind, the average price of praseodymium oxide in 23Q3 was 0.4866 million/ton, down 33.2% year on year, up 1.0% month on month; average price of terbium oxide was 7.77 million yuan/ton, down 41.8% year on year, down 9.6% month on month; and disidium oxide was 2.39 million yuan/ton, up 4.6% year on year and 17.2% month on month.
Production and sales of main products increased year-on-year in the first three quarters, and it is expected that the Peak project will be put into operation. According to the company's three-quarter report, 23Q1-Q3 rare earth oxide production was 12,341 tons, up 23% year on year, sales volume increased 24% year on year; rare earth salt production was 59035 tons, up 167% year on year, sales volume was 10,964 tons, up 87% year on year; rare earth metal production was 12,395 tons, up 48% year on year, sales volume was 10317 tons, up 56% year on year; rare earth concentrate (containing monazite) was 16572 tons, up 128% year on year, sales volume was 34,961 tons, up 24% year on year.
Profit forecasting and investment advice. The company's EPS for 23-25 is expected to be 0.15/0.27/0.46 yuan/share, respectively, and PE corresponding to the closing price on October 27 is 69.8/38.6/22.7 times, respectively. In the context of carbon neutrality and the peak procurement season in the fourth quarter, rare earth prices are expected to operate at a high level. Considering the continuous strength of the company's overseas upstream rare earth resources, we think it is reasonable to give the company a 23-year 2.5 times PB valuation. The corresponding company's reasonable value is 13.56 yuan/share, maintaining the company's “buy” rating.
Risk warning. Demand falling short of expectations poses a risk of falling rare earth prices; risk of overseas project development and operation; risk of exchange rate fluctuations; risk of domestic rare earth indicators and related policies exceeding expectations.