Incident: The company released its 2024 mid-year report. 24H1 achieved revenue of 2.539 billion yuan, a decrease of 19.59%, a net profit of 0.15 billion yuan, a decrease of 37.94%, of which Q2 revenue was 1.366 billion yuan, a decrease of 23.33%, an increase of 16.47%, and a net profit of 0.072 billion yuan to mother, a decrease of 42.03%, a decrease of 8.27%.

24H1 rare earth prices dropped significantly year-on-year, putting pressure on the company's performance. 24H1's shipments of high-performance NdFeB permanent magnet materials increased 10% year-on-year. However, due to factors such as the overall decline in the price of rare earth raw materials, continued intensification of market competition, and shrinking demand in some downstream application areas, the company's operating income and net profit for high-performance NdFeB permanent magnet materials and components all declined compared to the same period last year. Taking rare earth prices as an example, the average price of 24H1 Shanghai praseodymium oxide 24H1 was about 0.381 million yuan/ton, a year-on-year decrease of about 33.4%. Meanwhile, the average price of 24H1 sintered NdFeB (48H) in China was about 0.215 million yuan/ton, a year-on-year decrease of about 39.2%. Corresponding to this, the company's revenue and net profit also showed a year-on-year decline in 24H1.

However, up to now, prices of rare earths and magnetic materials have stabilized. Looking forward to the future, rare earth prices are expected to continue to pick up and rise, negative effects on inventories are expected to gradually be eliminated, and magnetic material profits may be gradually released. As of August 29, the price of praseodymium oxide in Shanghai had rebounded steadily to 0.4026 million/ton, up about 10.8% from the end of June. The price of 48H sintered NdFeB also rebounded to 0.21 million/ton on August 26. Looking forward to the future, on the one hand, the supply side showed an improvement trend. On August 20, the Ministry of Industry and Information Technology and the Ministry of Natural Resources issued the second batch of rare earth mining, smelting and separation total control indicators for 24 years. The cumulative year-on-year increase over the first two batches last year was 12.5%/10.4%, and the trend of supply-side convergence gradually became clear. On the other hand, in the context of “carbon peak and carbon neutrality,” the boom and market prospects of downstream new energy vehicles and other industries continue to improve. At the same time, the gradual implementation of new demand such as humanoid robots is also expected to drive the release of long-term demand for magnetic materials. Prices of rare earths are likely to continue to pick up and rise. As rare earth prices stop falling and stabilize, the negative impact on inventories is expected to gradually be eliminated, and profits from magnetic materials may be gradually released.

Profit forecast: Considering factors such as changes in rare earth prices, we adjusted the company's EPS to be 0.43, 0.50, and 0.57 yuan, respectively, and PE to be 19, 17, and 15 times, respectively. Risk warning: project progress falls short of expectations, production capacity release falls short of expectations, and metal prices fall short of expectations.