Events:
Shenhe Resources issued the annual announcement in 2020 and the announcement in the first quarter of 2021: the operating income in 2020 was 8.16 billion yuan, an increase of 17.2% over the same period last year. The net profit belonging to shareholders of listed companies in 2020 was 320 million yuan, an increase of 218.4% over the same period last year, which was better than we expected. The company's revenue in the first quarter of 2021 was 2.35 billion yuan, an increase of 32.3% over the same period last year, and its net profit was 310 million yuan, an increase of 2787.4% over the same period last year, better than we expected.
Comments:
In 2020, the company's operation is sound, and the production expansion project is carried out in an orderly manner. The output of rare earth oxides and rare earth metals in 2020 is basically the same as that in 2019, which is commendable to eliminate the impact of the shutdown caused by the 2020 epidemic and flood. Thanks to the upward price of rare earths, revenue this year increased by 17.2% compared with the same period last year, of which the revenue from rare earth oxidation and monazite increased by 28% year-on-year and 92% in 2020. Due to the loss of inventory and fixed assets caused by floods, and the change in net profit brought about by the implementation of a series of cooperation agreements of MP (the company held by the company, which was restructured and listed on the New York Stock Exchange in 2020), respectively, the change in net profit was-0.93 million yuan. Chenguang rare earth "annual output of 12000 tons of rare earth metals and alloys intelligent technical renovation project", Coburi 6000 tons of rare earth metal technology upgrading project have been started. Dechang 2000 tons / year rare earth metal project has been approved.
In 2021, Q1 benefited from the booming downstream demand and high profits. The main downstream of rare earths continued to thrive in the first quarter of 2021. In March 2021, the total output of new energy vehicles in China was 313% compared with the same period last year, and the output of frequency conversion air conditioners, refrigerators and washing machines increased by 118%, 92% and 52% respectively. As a result, the company expanded its sales scale, and its revenue increased by 32.3% compared with the same period last year; sales expenses decreased by 61% compared with the same period last year, due to the completion of the divestiture of Runhe, a subsidiary with relatively high sales costs, in 2020. Under the increase in income and the reduction of capital, the company's return net profit increased by 2787.4% in the first quarter of 2021 compared with the same period last year.
Shenghe Resources: a high-growth rare earth leader. The company obtains mining rights indirectly through trusteeship and equity participation, and obtains overseas rare earth mineral sources through overseas investment and mergers and acquisitions. At present, the company's existing rare earth separation capacity is about 15000 tons / year, rare earth metal processing capacity is 12000 tons / year, with a total annual production capacity of 27000 tons, which is at a high level in the industry. After the completion of production expansion, the company expects a total production capacity of 37000 tons in 2022.
The performance exceeded expectations and raised the profit forecast. In 2023, we estimate that the company's revenue in 2021, 2022, and 2023 will be 132, 161, 19 billion yuan respectively, with a growth rate of 62%, 22%, 18%, respectively. Considering the continuous prosperity, supply or long-term rigidity downstream of rare earths, the company's Chenguang rare earth and Coburi projects have steadily expanded, so the net profit of 2021 / 2022 will be raised from 1.08 billion yuan to 1.77 billion yuan, which is a growth rate of 294% and 37% respectively. In 2023, the corresponding PE of 20211x2022Compact is 24Universe 18Universe 14x, maintaining the company's "Buy" rating.
Risk hint: downstream demand is lower than expected; the company's production expansion plan is not as expected.