occurrences

On August 28, the company released its 2024 semi-annual report. 24H1 achieved revenue of 3.362 billion yuan, -2.00%; net profit to mother was 0.12 billion yuan, -64.02% YoY; 2024 revenue was 1.825 billion yuan, +18.81%, YoY +2.58%; net profit to mother was 0.018 billion yuan, -82.31% YoY, and -88.35% YoY.

reviews

The execution of price locked orders was delayed, and performance continued to be hampered. 2024 The average market prices of neodymium alloy and neodymium iron boron were -0.11%, -6.36% to 0.4773 million/ton and 348.80 yuan/kg, respectively; lagging changes in raw material costs and delays in execution of price lock orders signed by individual customers when prices of rare earth raw materials were relatively high, affecting the gross margin of 1H24 by about 3 PCT; the “Phase II” projects at Ningbo and Baotou factories increased production personnel investment before production, leading to a significant increase in costs and expenses. Among them, the impact of the Ningbo plant on net profit was about 0.03 billion yuan.

The company's Q2 gross margin was -2.52pct to 7.51% month-on-month, and gross profit -11.04% month-on-month to 0.137 billion yuan. Considering the company's 1H24 production and sales volume increased by more than 40% year on year, and considering the company's past gross profit structure, we estimate that the unit cost of the company's magnetic products in 2024 is -4.53% month-on-month to 0.2734 million yuan/ton, and the unit gross profit is -31.34% month-on-month to 0.0223 million/ton.

Cost reduction and efficiency are being promoted, and high-level R&D investment continues. The company's rate for the 2024 period was -0.61pct to 6.68%; of these, management expenses were -31.71% to 0.028 billion yuan, and the management fee rate was -1.14pct to 1.53% month-on-month. Facing the overall decline in the industry, the company still maintained a high level of R&D investment. In 2024, R&D expenses were +4.00% to 0.078 billion yuan month-on-month.

The first mid-term dividend raised the level of dividends. 2024H1 plans to distribute equity for the first half year, with a cash dividend of 0.8 yuan (tax included) for every 10 shares. The estimated dividend amount is 0.107 billion yuan, with a dividend ratio of nearly 90%. The company's cumulative dividend ratio for 2018-2023 is 42%.

The market share of new energy vehicles is stable, and the share of the air conditioning market has increased significantly. The company's 24H1 NEV magnets can be assembled at +220.63% to 2.45 million vehicles, and the global share remained at 30% +; air conditioning magnets were +68.64% to 46.37 million units, and the estimated domestic share was +9.97pct to 29.53% of upstream control resources compared to the same period last year, showing a prototype of an integrated pattern. In July '24, the company's subsidiary Jinli Hong Kong Technology plans to subscribe for 9.8% of Hastings's total share capital after the issuance; the rare earth project is expected to produce 0.037 million tons of rare earth concentrate per year after the first phase of H1 is completed in 2026.

Profit Forecasts, Valuations, and Ratings

The company's 24-26 revenue is estimated to be 7.62/9.22/10.72 billion yuan, net profit to mother of 0.348/0.572/0.705 billion yuan, EPS 0.26/0.43/0.52, respectively, and corresponding PE is 39.97/24.32/19.74 times, respectively. Maintain a “buy” rating.

Risk warning

Demand fell short of expectations; rare earth prices fluctuated; supply of magnetic materials exceeded expectations.