\u3000\u3 China Vanke Co.Ltd(000002) 645 Jiangsu Huahong Technology Co.Ltd(002645) )
Core view:
The company is a leading enterprise in the two renewable resource segments of rare earth recycling and scrap steel processing. The company has formed two renewable resource businesses of rare earth recycling and scrap steel recycling and elevator parts business. The company's steel scrap processing equipment accounts for about 30% of the market and is the leader in this field. At the same time, it has completed the layout of the whole industrial chain of automobile disassembly and steel scrap processing operation. In the field of rare earth recycling, the company has a waste treatment capacity of more than 20000 tons and a production capacity of 5500 tons of praseodymium neodymium oxide, accounting for more than 25% of the market. It is an absolute leader in the industry and has opened up the rare earth recycling industrial chain of waste collection, rare earth recycling and magnetic material processing. At the same time, Wilman, a subsidiary of the company, is the leader in the field of elevator parts.
In the context of double carbon, the demand for rare earths has improved, and the demand for new energy vehicles and industrial motors has increased significantly. China's rare earth mining and smelting capacity occupies a leading position in the world. The global short-term supply increment mainly comes from the growth of China's total amount control indicators. In 2022, the total control indicators of the first batch of rare earth mining, smelting and separation were 100800 tons respectively, with a year-on-year increase of 20%. On the demand side, rare earth materials have a good prospect under the background of carbon neutralization. High performance rare earth permanent magnet materials are the core materials in the fields of new energy, energy conservation and environmental protection: we calculate that new energy vehicles are the downstream with the largest demand increment of rare earth permanent magnet materials, and the demand for praseodymium and neodymium is expected to reach 246 ~ 41000 tons in 2025; The demand of rare earth permanent magnet industrial motor corresponding to praseodymium and neodymium in 2025 is expected to reach 15000 tons; The demand for praseodymium and neodymium of wind power permanent magnet motor is expected to double to about 12000 tons in 2025.
The significant high growth of carbon reduction in electric furnace steelmaking determines that the scrap industry chain is expected to continue to be booming, and the carbon emission of the steel industry accounts for 15% of the country, which is the manufacturing industry with the largest proportion. The carbon emission intensity per ton of steel in long process is about 1.46 tons of CO2 / ton of steel, while that in short process electric furnace is 0.08 tons, which has a significant carbon reduction effect. Therefore, the development of EAF steel is an effective means to promote carbon emission reduction in the industry. The guiding opinions on promoting the high-quality development of iron and steel industry and other policies encourage the development of short process steelmaking. Scrap steel is the main carbon raw material for short process EAF steelmaking, which will significantly benefit from the growth of EAF steel production capacity. In 2021, China's steel-making scrap was about 233 million tons, accounting for 22.56% of the crude steel output. Compared with the international average of 36%, this level has great room for improvement; At the same time, China has entered the high growth cycle of automobile scrap, which will also become one of the important growth points of the scrap industry chain.
Judgment and rating description of Industry Valuation
It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 532 million, 711 million and 928 million respectively, and the corresponding PE will be 19x, 14x and 11x. With reference to comparable companies, the company has certain valuation advantages, and the rare earth recycling and scrap business has a high growth. It is determined to be covered for the first time and given a "recommended" rating.
Risk tips:
Rare earth prices fluctuate more than expected, and there is a risk of ineffective control of scrap steel and elevator gross profit margin.
