China Rare Earth Group's only listing platform, leading medium to heavy rare earths
The company is mainly engaged in the production and operation of rare earth oxide products and rare earth technology research and development and consulting services.
In 2023, the company's rare earth mining index was 67,200 tons, accounting for 28.0% of the total national target; among them, medium and heavy rare earth/light rare earth mining indicators were 13,000/54,000 tons respectively, accounting for 67.9%/24.5% of the total national index; the rare earth smelting and separation capacity index was 63,200 tons, accounting for 27.5% of the total national target.
As the only listing platform for China Rare Earth Group at this stage, the company will collaborate with China Rare Earth Group's industrial planning to actively promote the integration and restructuring of internal and external rare earth assets.
The injection of high-quality assets into Zhongxi Hunan will increase the company's net profit on 2023/12/5. The company announced that part of the capital raised by issuing shares to specific targets to acquire 94.67% of Zhongxi Hunan's shares held by Zhongxi Development has completed the transfer, and the Jianghua Rare Earth Mine project under the Minmetals Rare Earth Group has entered the production and operation stage. The Jianghua Rare Earth Mine is the mining project with the highest single ionic rare earth mining index in the country. According to the prospectus for issuing A-shares to specific targets (registration draft), the “Mining Rights Assessment Report” issued by the evaluation agency estimates that Zhongxi Hunan's projected net profit for the 2023-2026 mining rights caliber is 2.40/1.60/1.70/189 million yuan, respectively.
With the optimization of the industry's supply and demand pattern in 24, rare earth prices are expected to bottom out and rise. Recently, the Ministry of Industry and Information Technology issued the first batch of rare earth mining and smelting and separation total control indicators for 2024, which were 135/127,000 tons, respectively, up 12.5%/10.4% year on year. The year-on-year growth rate of the first batch of rare earth mining indicators in 22-23 was 20%/19%, respectively, and the year-on-year growth rate of the first batch of smelting and separation indicators was 20%/18%, respectively; the growth rate of the first batch of rare earth mining and smelting indicators in '24 was lower than in previous years. Against the backdrop of slow growth on the supply side of rare earths in '24 and maintaining relatively rapid growth on the demand side, the rare earth industry's supply and demand pattern is expected to be optimized, driving rare earth prices to bottom up.
Profit forecasting and investment advice
The company is the only listing platform for China Rare Earth Group, and the Group's high-quality asset injection can be expected to increase profits. We estimate that the company's net profit for 2023-2025 will be RMB 216/359/433 million, EPS 0.20/0.34/0.41 yuan, respectively, and CAGR of 1.34% for 3 years. We gave Chinese rare earths 90 times PE in 2024, with a target price of 30.45 yuan; maintaining the “gain” rating.
Risk warning: risk of a sharp drop in rare earth prices; group asset injections falling short of expectations; risk of changes in industrial policy; risk of safety and environmental protection.