The company released its 2024 mid-year report

2024H1's revenue was 3.362 billion yuan, or -2.00% YoY, and realized net profit of 0.12 billion yuan, or -64.02% YoY, after deducting non-return net profit of 0.034 billion yuan, or -88.18% YoY.

Among them, 2024Q2 revenue was 1.825 billion yuan, +2.58% year over month; realized net profit of 0.018 billion yuan, -88.35% year on year and -82.31% month on month; net profit without return to mother 0.009 billion yuan, -94.25% year on year and -61.54% month on month.

Reduced prices of rare earth raw materials, execution of individual customer orders, and increased investment in new production capacity affected performance. Factors such as a sharp drop in the market price of rare earth raw materials over the same period last year, lagging changes in raw material costs, and delays in execution of price lock orders signed by individual customers when prices of rare earth raw materials were relatively high, compounded by increased competition in the industry, etc., which had a certain impact on the sales price and profit of the company's products. In the first half of 2024, the company's Ningbo factory and Baotou factory (phase II) projects increased production personnel reserves, training and early resource investment before delivery, making full preparations for mass production work, resulting in relatively high manufacturing and management costs per product unit and reduced profits. Among them, the impact of the Ningbo plant on net profit was about 30 million yuan.

The company's production and sales increased by more than 40% year on year, and rare earth prices are under pressure

Downstream structure: 2024H1 revenue from NEVs, inverter air conditioning, and wind power was 1.593, 0.856, and 0.209 billion yuan in that order, with year-on-year changes of -2.27%, +12.78%, and -32.36%, accounting for 47.39%, 25.46%, and 6.22% of revenue in that order. The company is also actively deploying new energy, energy saving and environmental protection fields such as robots, industrial servo motors, 3C, energy-saving elevators, rail transit, etc.

The sales volume of the company's NEV drive motor magnetic steel products is about 2.45 million vehicles, the sales volume of energy-saving inverter air conditioning magnetic steel products is about 46.37 million units that can be equipped with inverter air conditioning compressors, and the sales volume of products in the wind power sector is about 5.73 GW.

Production and sales volume: The production and sales volume of 2024H1's high-performance magnetic products increased by more than 40% year on year, and its market share increased steadily.

Price: The average price of 2024H1 metal praseodymium (tax included) was 0.4719 million/ton, -32.80% YoY.

The capacity utilization rate exceeds 90%, and the plan is to build 0.04 million tons of production capacity in 25 years

Capacity utilization rate: 2024H1's capacity utilization rate continues to exceed 90%.

Magnetic material production capacity planning: The company currently has an annual rough production capacity of 0.023 million tons (Baotou 0.008 million tons+Ganzhou 0.015 million tons). The Baotou Phase II 12000 tons/year production capacity project, the Ningbo 3,000 tons/year high-end magnetic materials and 0.1 billion bench module production capacity project, and the Ganzhou high-efficiency and energy-saving motor magnetic material base project are under construction according to plan. It is planned to build 0.04 million tons of high-performance rare earth permanent magnet material production capacity and an advanced magnetic component production line by 2025.

In line with humanoid robot component development, it is proposed to acquire shares in Australian listed rare earth companies

The company actively cooperates with world-renowned customers in the research and development of magnetic components for humanoid robots. The company plans to invest in the construction of a “Mexico project to build a new production line with an annual output of 1 million units/magnetic module” in Mexico, which will help enhance the company's market competitiveness in fields such as humanoid robots and new energy vehicles.

On July 5, 2024, Jinli Hong Kong Technology, a wholly-owned subsidiary of the company, and Hastings, an Australian-listed rare earth company, signed a binding list of terms, agreeing that Jinli Hong Kong Technology would subscribe for an additional 19.647 million shares of Hastings common shares at a subscription price of 0.36 Australian dollars/share, with a total subscription amount of about 7.07 million Australian dollars (approximately RMB 34.6 million). After the subscription was completed, Jinli Hong Kong Technology held shares in Hastings's total share capital after the increase 9.8% The source of funding for this subscription is H share fund-raising.

Actively give back dividends to shareholders

For the first time, the company plans to distribute equity for half a year, and distribute a cash dividend of 0.8 yuan (tax included) to all shareholders for every 10 shares. The estimated dividend amount is 0.107 billion yuan, and the dividend ratio is about 90%.

Investment advice:

The estimated revenue for 2024-2026 is 6.343, 8.335, 9.717 billion yuan, and net profit is 0.395, 0.911, and 1.175 billion yuan, and the corresponding EPS is 0.29, 0.68, and 0.87 yuan/share, respectively. Currently, the corresponding PE price is 36.0, 15.6, and 12.1 times. Since 2024 results are affected by many factors such as customer order execution and investment in production capacity, the 2025 EPS was selected as the basis for valuation. Maintaining a “buy-A” rating, the target price for 12 months is 17 yuan/share, which corresponds to 25 times PE in 25 years.

Risk warning: demand falls short of expectations, prices of rare earth raw materials fluctuate greatly, and project progress falls short of expectations