Income continues to grow, while net profit growth declines. In the first three quarters of 2022, the company achieved revenue of 6.546 billion yuan (+ 33.58%), net profit of 402 million yuan (+ 2.89%), and non-return net profit of 330 million yuan (- 10.27%). Among them, the revenue in the third quarter was 1.887 billion yuan (+ 8.25%), the net profit was 14 million yuan (- 89.43%), and the non-return net profit was-26 million yuan (- 120.62%).
Thanks to the continued growth in the comprehensive utilization of rare earth recycled materials, the company's revenue continued to grow; however, due to the rapid decline in rare earth oxidation market prices in the third quarter, the company's overall net profit decreased significantly compared with the same period last year.
Rare earth oxide market prices stabilized, profitability may usher in marginal improvement, long-term rare earth recovery of new production expansion to drive high performance. The production of rare earth permanent magnet materials entered the peak season in the fourth quarter, the replenishment demand of rare earth permanent magnet materials enterprises increased, driving the market price of rare earth oxides to stabilize, and it is expected that the gross profit margin of the company's comprehensive utilization of rare earth waste is expected to improve. In the long run, the demand for rare earth permanent magnet materials in downstream new energy vehicles, wind power equipment, frequency conversion air conditioners, robots and other fields continues to release, and the company's Xintai Technology and Wanhong Hi-Tech new rare earth oxide products can be digested. The company's revenue and net profit are expected to continue to grow rapidly.
The production capacity of magnetic materials has been further expanded, and the comprehensive strength has been continuously strengthened. Xintai Technology transferred its 100% stake in Zhonghang New Materials to the company, and Zhonghang New Materials became a wholly-owned subsidiary of the company, which will help the company integrate internal resources and optimize business structure. promote management efficiency, operational efficiency and reduce the company's operating costs.
Zhonghang New Materials plans to set up Ningbo Zhonghang New Materials to invest in the construction of the "annual output of 4000 tons of high-performance magnetic materials project". After the completion of the future project, the company's magnetic production capacity will be increased to 6000 tons per year, ensuring the company's new rare earth oxide products can be digested, at the same time to further enhance the company's overall competitiveness and profitability.
The production capacity of renewable resources processing equipment has further increased, and profits are expected to increase. The company plans to issue convertible bonds to raise 105 million yuan for the "large-scale intelligent renewable metal raw material processing equipment expansion project". The company has a strong demand for renewable resources and equipment, stable process control technology, and product quality is deeply recognized by downstream customers. It is expected that with the landing of the fund-raising project, the company's renewable resources processing equipment business performance will further grow. At the same time, the company's convertible bond raising projects are mainly large equipment, the gross profit margin of large equipment is relatively high, and the increase in the proportion of large equipment sales will drive the company to improve the profitability of renewable resources processing equipment.
Risk tips: new production capacity is not as expected, rare earth oxide prices fluctuate, market competition intensifies.
Investment advice: downgrade earnings forecasts and maintain a "buy" rating. It is estimated that the net profit of homing from 2022 to 2024 will be 100 million yuan in 6-9-11, with a year-on-year growth rate of 100 million yuan and 18% compared with the same period last year. The EPS will be 1.03 pound 1.53 billion yuan respectively, and the current stock price corresponds to PE=17/12/10x. The company's rare earth recycling business and magnetic production business capacity expansion, superimposed renewable resources processing equipment business capacity increase and profit improvement, the company's performance is expected to maintain rapid growth. Give the company 14-15 times PE in 2023, corresponding to a reasonable value of 21.42-22.95 yuan per share, a premium of 22% to 30% over the current share price, and maintain a "buy" rating.