\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 111 China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) )
Events
China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) released the annual performance forecast for 2021: it is estimated that the net profit attributable to shareholders of Listed Companies in 2021 will be RMB 4.9 billion-5.061 billion, with a year-on-year increase of 488.58% – 507.79%. The net profit after deducting non recurring profit and loss is expected to be RMB 4.707 billion to RMB 4.867 billion, with a year-on-year increase of 484.16% – 504.02%.
Key investment points
The annual performance rose sharply, thanks to the simultaneous rise in the volume and price of rare earth products.
In the two batches of rare earth mining indicators for 2021 jointly issued by the Ministry of industry and information technology and the Ministry of natural resources, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) obtained a total mining index of 10035 tons, accounting for 59.73% of China’s total index. The indicators obtained by the company increased by 26800 tons year-on-year, an increase of 36.4%. In terms of price, the average price of praseodymium and neodymium oxide in China reached 590900 yuan / ton in 2021, a year-on-year increase of 90.64%. The net profit in the fourth quarter is expected to be RMB 4.900-5.061 billion, with a month on month increase of 57.28% – 71.74%. Profits rose sharply in the fourth quarter, mainly due to the further rise in product prices. The price of praseodymium and neodymium oxide in the fourth quarter was 759300 yuan / ton, 28.50% higher than that in the previous quarter.
In 2022, the first batch of rare earth control indicators were issued, and China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) won most of the increment
On January 28, the first batch of rare earth mining control indicators issued by the two ministries and commissions in 2022 was 100800 tons, with a year-on-year increase of 16800 tons, an increase of 20%. Among them, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) group obtained 602100 tons of indicators, with an increase of 1608000 tons, accounting for most of the increment of mining indicators. Moreover, the mining control index of China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) group accounts for 59.73%, which is in a leading position.
The supply contract with Inner Mongolia Baotou Steel Union Co.Ltd(600010) rare earth concentrate has been finalized, and the overall cost is controllable
In January, the company announced that it had signed the rare earth concentrate supply contract with the related party Inner Mongolia Baotou Steel Union Co.Ltd(600010) and the price of rare earth concentrate would be adjusted to 2688720 yuan / ton (dry weight, REO = 51%) excluding tax from January 1, 2022. For every 1% increase or decrease in REO, the price excluding tax would increase or decrease by 527.20 yuan / ton (dry weight). Compared with 16269 yuan / ton in 2021 (dry volume, REO = 51%), the overall trading concentrate price has increased slightly this year, which is expected to increase the company’s cost by 65%. However, the concentrate price is still far lower than the market price, and the increase of concentrate price is less than that of rare earth oxide price. The company’s profit per ton of products is still expected to remain high.
Under the background of carbon neutralization, the value of rare earth is expected to be reconstructed
Under the background of carbon neutralization, wind power, electric vehicles and permanent magnet industrial motors drive the rapid growth of the demand of rare earth permanent magnet material industry chain. In terms of supply, China’s policy strictly controls the increment. After the establishment of the six rare earth groups, China has established a rare earth giant – China rare earth group, and the supply concentration has been further improved. As China’s strategic resources, rare earth mining and supply remain rigid, and the value of rare earth resources is prominent. The company grasps the mining and separation indicators and will benefit from the reconstruction of rare earth value.
Profit forecast
It is predicted that the net profit attributable to the parent company from 2021 to 2023 will be 4.962 billion yuan, 8.636 billion yuan and 10.959 billion yuan respectively, and the EPS will be 1.37, 2.38 and 3.02 yuan respectively. The corresponding PE of the current stock price will be 35, 20 and 16 times respectively, and the “recommended” investment rating will be given.
Risk tips
1) China’s rare earth production quota increased more than expected; 2) The investment of overseas rare earth mines exceeded expectations; 3) Downstream demand was lower than expected.
