Key investment points
Rare earth has become the core driving material in the low-carbon era: due to its unique atomic structure, rare earth elements can produce special energy conversion, transmission and storage functions in the fields of light, magnetism and electricity. Through processing, new functional materials can be formed to meet the energy-saving needs of faster, smaller and lighter products. Among them, rare earth neodymium iron boron has two characteristics of "miniaturization" and "high magnetic energy", In line with the energy-saving and environmental protection needs of lightweight, miniaturization and high efficiency, it has become the most important rare earth application material, accounting for 55% of the increment of rare earth application materials in recent six years.
Growth of rare earth permanent magnet demand: with the implementation of the low-carbon concept in the economy, the downstream demand for high-performance NdFeB has undergone qualitative and quantitative changes. New energy vehicles, traditional vehicles, variable frequency air conditioners and industrial Siasun Robot&Automation Co.Ltd(300024) have replaced consumer electronics as the main downstream consumer industry of high-end NdFeB, The diversification of demand driven industries and the large-scale volume indicate that rare earth permanent magnet has entered a new era.
Demand for high-efficiency and energy-saving motors has doubled: with the increase of global penetration of new energy vehicles and the popularity of industry Siasun Robot&Automation Co.Ltd(300024) , the large-scale of wind turbines, the replacement and transformation of old elevators and the improvement of China's industrial motor energy efficiency standards, we cautiously predict that the annual compound growth rate of global demand for neodymium, iron and boron will be between 20% - 25% from 2021 to 2025. The incremental contribution mainly comes from the new energy automobile industry motor and Siasun Robot&Automation Co.Ltd(300024) , which account for 85% of the incremental demand, and China contributes 60% of the global incremental demand.
China has a global core position in the rare earth permanent magnet industry: the global light rare earth supply pattern tends to be stable again after diversification. In the next three years, China will still be the incremental source and approved leading force of global rare earth supply, and the compound annual growth rate of quota from 2016 to 2021 will be about 10%. China is the only country that has formed an industrial chain of "rare earth resources - smelting separation - functional materials - applied products". Smelting separation capacity accounts for 88% of the world's total, and high-performance output accounts for 77% of the world's total. In terms of technical patents, the number of patents increased by 250% from 2011 to 2018, and a number of technology and industrial centers have been formed.
Investment strategy: the upstream is optimistic about China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) with increment, and the proportion of the company in the first batch of mining and separation quota in 2022 is 95.7%; The leading companies of downstream magnetic materials have high technical added value and are less impacted by the cost of raw materials. They have technical barriers and customer barriers. The capacity of Beijing Zhong Ke San Huan High-Tech Co.Ltd(000970) , Ningbo Yunsheng Co.Ltd(600366) , Jl Mag Rare-Earth Co.Ltd(300748) , Yantai Zhenghai Magnetic Material Co.Ltd(300224) , Innuovo Technology Co.Ltd(000795) listed companies of magnetic materials with a capacity of more than 10000 tons in 2020 accounts for about 40% of China's output of Nd-Fe-B, with a high degree of concentration. With the expansion of capacity in the future, The concentration of advantageous enterprises is expected to further improve, and they are optimistic about Jl Mag Rare-Earth Co.Ltd(300748) and Yantai Zhenghai Magnetic Material Co.Ltd(300224) .
Risk warning: the release range of quota is higher than expected; The output growth rate of downstream industries is lower than expected; The permeability of NdFeB magnetic material is lower than expected; Technological or material breakthroughs have led to changes in the demand for Nd-Fe-B.
