\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 111 China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) )
Event: the company released the 2021 annual report. During the reporting period, the operating revenue reached 30.408 billion yuan, a year-on-year increase of 38.83%; the net profit attributable to the parent reached 5.130 billion yuan, a year-on-year increase of 462.32%; the net profit deducted from non attributable to the parent reached 4.967 billion yuan, a year-on-year increase of 444.50%, and the performance growth was in line with expectations.
Comments:
In 2021, the price of rare earth raw materials and functional materials increased rapidly, and the production and sales volume increased simultaneously, which boosted the company’s performance. In 2021, the downstream demand of the rare earth industry continued to be strong, and the increase in the volume and price of the company’s rare earth raw materials and various rare earth functional materials boosted the company’s performance. During the reporting period, the company actively strived for the indicators of the national total rare earth production control plan and scientifically organized and arranged production according to the indicators. By continuously improving the mining and smelting process of rare earth ore and expanding its rare earth functional material business, the company achieved steady growth in business performance. According to the report, the company has a smelting and separation capacity of 120000 tons / year, a rare earth metal capacity of 16000 tons / year, a magnetic material alloy capacity of 41000 tons / year, a polishing material capacity of 32000 tons / year, a hydrogen storage alloy capacity of 8300 tons / year, and a rare earth based flue gas denitration catalyst capacity of 12000 cubic meters / year. In terms of gross profit margin, the gross profit margin of rare earth raw materials reached 38.43%, up 10.96 percentage points year-on-year, contributing 4.317 billion yuan; The gross profit of rare earth materials increased by 7.8% year-on-year to 4.9 billion yuan, with a gross profit margin of 4.1 billion percentage points. In addition, in 2021, the company accelerated the construction of rare earth metals, high-end magnetic materials, environmental protection and other projects, and the production capacity of various rare earth businesses was continuously released. The performance growth of the company in 2021 was in line with expectations.
The leading position of rare earth is consolidated and the cost advantage is prominent. In the first batch of rare earth mining and smelting indicators in February 2022, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) obtained the largest mining and smelting indicators, which were 602100 tons and 53800 tons respectively, accounting for 59.73% and 55.33% of the total mining and smelting indicators respectively, highlighting the leading position of the company in the industry. The company adheres to the development idea of “refining and optimizing rare earth raw materials, strengthening and expanding rare earth functional materials and making special terminal application products”, gives full play to its advantages of rare earth resources, and comprehensively arranges the upstream, middle and downstream industrial chain of rare earth through the continuous development of high value-added businesses such as rare earth functional materials and terminal application products, so as to promote the high-quality development of the company. In addition, relying on the advantages of Bayan Obo rare earth resources controlled by the controlling shareholder Baotou Iron and steel (Group) company, the company purchases the rare earth concentrate produced by its holding subsidiary Inner Mongolia Baotou Steel Union Co.Ltd(600010) because Inner Mongolia Baotou Steel Union Co.Ltd(600010) rare earth concentrate is exclusively used for China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) , the price of rare earth concentrate purchased by the company is far lower than the market price, and the company has a comparative cost advantage in rare earth products.
The short-term correction range is limited, and the rare earth industry continues to enjoy high prosperity. National policies continue to escort the high-quality development of the rare earth industry, accelerate the integration of supply side resources, and superimpose the strong downstream demand for new energy vehicles and industrial motors. The development sustainability and stability of the rare earth industry are strong. Since March, the prices of various rare earth raw materials have continued to callback, which helps to balance the supply and demand of rare earth raw material manufacturers and magnetic material manufacturers and promote the sustainable development of the industry. Combined with the market situation, the company focuses on the sustainable and healthy development of the industrial chain, performs the corporate responsibility and responsibility of rare earth head, and plays the role of ensuring supply and stabilizing price. Promote the balance between supply and demand by putting tight products into the market, and stabilize the price operation of rare earth products by adjusting pricing and trading mode. In the case of high prosperity in the lower reaches of rare earths and it is difficult to significantly improve the supply side, the correction range of rare earth prices is expected to be limited, and the prosperity of the rare earth industry will not change in the future.
Investment advice. It is estimated that the company’s EPS from 2022 to 2024 will be 2.13 yuan, 2.56 yuan and 2.93 yuan respectively, and the corresponding PE will be 16.34 times, 13.54 times and 11.84 times respectively. With the rapid development of global new energy vehicles, wind power and permanent magnet motors, there is a strong market demand for rare earth products, which provides a huge market space and development opportunities for the company. In addition, the company has accelerated the integrated layout of upstream and downstream of the industrial chain and the layout of various rare earth functional materials and terminal application products. The stability and sustainability of the company’s development in the future are good. Maintain the “recommended” rating of the company.
Risk warning. The downstream demand for rare earth functional materials is lower than expected, the competition of rare earth mines is intensified, and the price of rare earth products continues to decline.
