On August 31, 2022, the company released its semi-annual report for 2022, with operating income of 12.026 billion yuan in the first half of the year, an increase of 77.53% over the same period last year, a net profit of 187 million yuan, an increase of 123.69% over the same period last year, and a non-return net profit of 193 million yuan, an increase of 90.70%.

With the comprehensive deepening of reform, the company achieved another record in the first half of 2022. 2022H1, the company goes all out to stabilize production, ensure safety, seize production and operation, break through key projects, reform to stimulate momentum, so that the company in the first half of the year since the listing of the best operating performance in the same period. In terms of profitability, the company's gross profit margin and net profit margin in the first half of the year were 2.99% and 1.59% respectively, down 1.30% and 0.20% respectively from the same period last year, while ROE (diluted) was 5.51%, up 0.88% from the same period last year. 2022Q2, the company realized operating income of 7.159 billion yuan, an increase of 74.83% over the same period last year, an increase of 47.09% over the previous year, and a net profit of 106 million yuan, an increase of 156.02% over the same period last year and an increase of 30.86% over the same period last year.

The ability to guarantee resources will continue to be consolidated to establish the future development performance of the company. As the only legal main body of rare earth mining in Guangdong Province, the company has fully excavated existing mines in recent years, and at the same time accelerated the acquisition of high-quality mineral projects inside and outside the province to strengthen its own resource advantages and mineral supply. At present, the company has Pingyuan Renju rare earth mine, Dapu Wufeng rare earth mine two own rare earth mines, rare earth resources reserves of about 13000 tons. On July 10, 2022, the holding subsidiary Xinfeng Company completed all the certification procedures for the mining rights of Zuokeng rare Earth Mine, marking the company's addition of 111400 tons of high-quality southern ion rare earth reserves, greatly thickening the company's rare earth reserves. In addition, the company has two tungsten concentrates, Hongling Tungsten Mine and Shirenzhang Tungsten Mine. Hongling Company obtained new mining warrants in November 2021, adding 64000 tons of scheelite resources. The company's resource supply capacity continues to be guaranteed, laying a solid foundation for future performance development.

Key projects to speed up breakthroughs, rare earth industry strong chain complement chain. The company horizontally constructs the three major industrial layouts of "rare earth, copper and tungsten", and vertically builds a complete rare earth industry chain of "mining, smelting separation, intensive processing, trade circulation, import and export". We will further make good use of the indicators of distribution in the future. increase the output of rare earth minerals, smelting separation and magnetic materials. In the first half of 2022, the company made rapid breakthroughs in key projects, and Zuokeng rare earth mine is expected to be mined in 2023; Fuyuan relocation and renovation project, which has completed the capping of the main structure on April 29th, will be put into production in September; the holding subsidiary Guangdong Shengyuan annual 8000t/a high-performance NdFeB permanent magnet project has completed all the preparatory work, and the first batch of 3000 tons of magnetic materials is expected to be put into production by the end of this year. Hongling Company has successfully introduced strategic partners to jointly develop mineral resources, and the transformation and upgrading of tungsten ore in the past century is worth looking forward to.

Investment suggestion: the company aims at the core link of the rare earth industry chain, the strong complementary chain extends the chain, the resource guarantee ability continues to consolidate, and the key projects break through quickly. It is estimated that the company's basic earnings per share from 2022 to 2023 are 0.96 yuan and 1.43 yuan, and the current stock price is 63.60 times and 42.57 times corresponding to PE, maintaining the recommended rating.

Risk tips: the risk of macroeconomic fluctuations; the risk of lower-than-expected demand for rare earths and magnetic materials; the risk of fluctuations in rare earth prices; the risk of poor progress in project bidding; and the risks of production safety and environmental protection.