Net profit loss for 24Q1 was 216 million yuan, maintaining the “buy” rating company's revenue of 2,886 million yuan in 24Q1 (yoy -39.92%, qoq -39.50%); net profit to mother was 216 million yuan (yoy -378.59%, qoq -223.50%). Since the beginning of '24, the price of rare earth metals has fallen short of our previous expectations, so we assume that the price of rare earth metals will be lowered. The final estimate is that the company's EPS will be 0.42/0.65/0.73 yuan in 24-26 (previous value 0.48/0.65/0.73 yuan). Comparable company Wind agreed to expect an average value of 36X for 2024PE, giving the company 36X PE (2024E), corresponding to a target price of 14.92 yuan (previous value of 12.96 yuan), maintaining a “buy” rating.
Production of some of the company's products has increased, but it is difficult to beat the fall in rare earth prices
According to the 24Q1 financial report, the company's sales of rare earth oxides, rare earth salts, rare earth rare metals, zircon sand and titanium ore increased by -24.95%, 97.61%, 19.33%, 50.85% and 6.9%, respectively. According to Wind data, the average price of praseodymium oxide in 24Q1 was 386,000 yuan/ton, a year-on-year decrease of 42.3% and 21.9%, respectively. The increase in volume was difficult to beat the price, and the company's gross sales margin fell to 0.1% (yoy-11.52pct, qoq-1.81pct) in 24Q1.
The company's 24Q1 total period expense ratio is 2.63% (yoy-0.02pct, qoq+4.62pct). Furthermore, the company's credit depreciation in the first quarter was about 48 million yuan, and asset impairment was 134 million yuan, which had a certain impact on the company's performance.
The average price of rare earths declined in 24Q1 and high inventory, leading to a decline in the company's 24Q1 performance. According to Wind, 23Q1 and 23Q4, the average price of praseodymium oxide, a typical domestic rare earth oxide variety, was 669,000 yuan/ton and 494,000 yuan/ton, and the average price in 24Q1 was 386,000 yuan/ton, down 42.3% and 21.9%, respectively. The company's 24Q1 inventory turnover period is about 140 days, so there is a risk of asset impairment of raw materials, and 24Q1 asset impairment is about 133.8 million. Furthermore, due to the decline in the average sales price of rare earths in 24Q1 and the use of high-cost raw materials about a quarter ago, the company's gross profit declined significantly month-on-month in 24Q1.
Peer companies' 24Q1 performance all fell sharply month-on-month. Demand may drive rare earth prices to pick up 24Q1 rare earth prices and higher inventory turnover days. The net profit of the two leading domestic rare earth companies, Northern Rare Earth and China Rare Earth, both experienced a sharp month-on-month decline; among them, the net profit loss from China's rare earths to mother was about 289 million yuan (asset impairment loss was about -346 million yuan), and the net profit from Northern Rare Earth to mother was about 52 million yuan, down about 94.35% and 94.74% from the same period last month. Prices stopped falling in March. As the growth rate of home appliances, wind power, and manufacturing continues, demand may drive rare earth prices back up. We believe that the price of praseodymium oxide may gradually rise to more than 450,000 yuan/ton.
Risk warning: The industry's supply growth rate exceeded expectations, and downstream industry demand fell short of expectations.