Incident: In 2023, the company's net profit to mother was 2.37 billion yuan, minus non-net profit of 2.32 billion yuan, -62.6% year-on-year; the company's net profit to mother in the first quarter of 2024 was 52 million yuan, -94.3% year-on-year.
The company's rare earth sales continued to grow steadily, and falling rare earth prices dragged down the company's performance. 1) Benefiting from the increase in indicators, the company's production and sales of rare earth products increased dramatically. The company's rare earth oxide production/sales volume in 2023 was 176.28,800 tons, +30.2%/+21.5%, rare earth salt production/sales volume was 127/88,200 tons, +22.9%/30.9% year on year, and rare earth metal production/sales volume was 3.08/311,000 tons, +26.8%/30.3% year over year. Overall, the total rare earth ore index obtained by the company reached 178.65 million tons of REO, +26.1% year on year. On the other hand, the company promoted new construction Production lines have been steadily increasing, and the production capacity of the original production line has increased. 2) Affected by the decline in rare earth prices, the company's profitability declined: in terms of price, the average annual sales price of praseodymium oxide was about 530,000 yuan/ton in 2023, down about 36% year on year, leading to a general drop in the sales price of the company's products; in terms of cost, the average quarterly purchase price of rare earth concentrates in 2022 was about 29,000 yuan/ton (about 26,900 yuan/ton in 2022 Q1-Q3, and 353,000 yuan/ton in 22Q4), while the average quarterly price in 2023 was about 27,000 yuan/ton (3.53 in Q1/Q2/Q3/Q4 respectively) /3.10/2.02/20,500 yuan/ton), a slight year-on-year decrease. In the end, the company's gross margin/net margin in 2023 was 14.6%/7.8%, respectively, -13.2/-9.2pct. 3) The price of 2024Q1 rare earth continues to be under pressure, dragging down the company's performance: 2024Q1's rare earth oxide/ rare earth salt/ rare earth metal sales volume was 0.67/2.10/0.77,000 tons, +23.3%/24.7%/13.9%, and continued to expand, but the average price of 24Q1 praseodymium oxide continued to fall to 380,000 yuan/ton, -22% month-on-month, while the company's rare earth concentrate price was 20,700 yuan/ton, which was basically flat from month to month, so 24Q1 company's gross margin/net margin fell further to 7.7%/2.15% .
The medium- to long-term supply and demand pattern for rare earths is good, and future increases in domestic rare earth indicators will still be concentrated on the company. On the one hand, domestic indicators are strictly control+overseas growth is relatively limited, and the supply of rare earths is relatively limited. On the other hand, new energy vehicles, industrial motors, robots, etc. are still expected to bring a large increase in demand in the future, and the medium- to long-term supply and demand pattern for rare earths is good. However, the increase in domestic indicators is still concentrated on the company. In the first batch of rare earth indicators in 2024, the mine target obtained by the company was 94.58 million tons, +16.8% over the same period, accounting for 70%. The company is expected to enjoy the logic of price increase and volume increase at the same time in the future.
Profit forecast and investment advice: The company's net profit is expected to be 24.1/33.7/4.26 billion in 2024-2026. Considering that the company is expected to continue to receive an increase in rare earth indicators in the future, the company is given an “increase in wealth” rating.
Risk warning: rare earth prices fluctuate, domestic indicators exceed expectations, profit forecasts fall short of expectations.