Main points of investment

Global layout of rare earth resources and construction of diversified raw material protection channels the company has built a diversified rare earth concentrate supply channel by hosting the Dechang continental trough rare earth mine and selling the Mount pass rare earth mine in the United States, actually mastering the total rare earth mineral resources of nearly 50,000 tons per year (REO), accounting for about 20% of the world, providing sufficient raw material protection for the company's downstream business such as rare earth smelting and separation. The company has hosted the Sichuan Continental trough rare Earth Mine owned by he Geo Mining Industry, participated in the Yangfanggou rare Earth Mine in Mianning County, which is owned by Mianli rare Earth, and Shandong Gangyan owns the Weishan Lake rare Earth Mine in Shandong Province. Sichuan Dechang Continental trough rare Earth Mine, the main domestic mine, produced 9354 tons of rare earth concentrate in 2020. The company participates in the Mount pass rare earth mine in the United States and the Kovane Bay rare earth mine in Greenland, underwriting the rare earth products of the Mount pass rare earth mine (with an annual production capacity of 40,000 tons of rare earth concentrate REO).

The underwriting of overseas rare earth mines is exempt from the restrictions of national quotas, and the company's profits will be increased by expanding separation capacity in the future.

Thanks to the underwriting of overseas rare earth mines, the company's rare earth ore raw materials do not have to be limited by the national quota. In the future, with the expansion of smelting separation capacity, it is expected to continue to increase the company's profits and determine the growth. At present, the company has a rare earth oxide separation capacity of 15000 tons / year, rare earth metal smelting capacity of 12000 tons / year, and annual waste treatment capacity of 10,000 tons. The company is carrying out a number of production expansion projects, and it is estimated that the rare earth separation capacity and rare earth metal production capacity will be increased to 20000 tons / year and 21000 tons / year respectively in 2022, and the output of monazite will be increased from 10,000 tons to 30,000 tons.

Mixed ownership is the Soul of Company Development

The company is a unique mixed ownership listed company in the domestic rare earth industry, the state-owned shareholders play a guiding role in the company's development direction, and the private economy gives full play to the vitality of the company's market mechanism. The company mainly participates in holding companies, including Leshan Sheng and rare Earth Co., Ltd., Sichuan Runhe Catalytic New Materials Co., Ltd., and so on. The Institute of Comprehensive Utilization of Mineral Resources of the Chinese Academy of Geological Sciences is the controlling shareholder of the company, and its actual control is the Ministry of Finance. At the same time, the company has obvious policy advantages in deep cooperation with Chinalco (one of the six major rare earth groups) in the industry integration.

Profit forecast and valuation

Considering that we expect the company's operating income from 2021 to 2023 to be 9.35 billion yuan, 10.31 billion yuan and 11.61 billion yuan, the net profit of returning to the mother is 980 million yuan, 1.23 billion yuan and 1.56 billion yuan respectively, and the corresponding PE is 31 times, 24 times and 19 times respectively.

Risk tips: overseas epidemic continues to spread the risk of sharp fluctuations in rare earth prices, new energy vehicles, wind power installed and other downstream demand is lower than expected risk.