\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 111 China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) )
Event: China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) released the annual report of 2021. In 2021, the company achieved an operating revenue of 30.408 billion yuan, a year-on-year increase of 38.83%, of which Q4 achieved an operating revenue of 6.317 billion yuan, a year-on-year increase of + 5.05% and a month on month increase of - 32.58%; The net profit attributable to the parent company was RMB 5.130 billion, with a year-on-year increase of 462.32%, of which the net profit attributable to the parent company in Q4 in a single quarter was RMB 1.981 billion, with a year-on-year increase of + 417.14% and a month on month increase of + 77.95%; The non net profit deducted was 4.967 billion yuan, a year-on-year increase of + 444.50%, of which the non net profit deducted in Q4 in a single quarter was 2.008 billion yuan, a year-on-year increase of + 490.27% and a month on month increase of + 94.62%. The company previously disclosed that the upper limit of 21-year performance forecast was 5.061 billion yuan, and the performance exceeded expectations.
The rise in both volume and price helped the company achieve the best performance in history. 1) Price: the contradiction between supply and demand intensified, and the price of rare earth products rose sharply during the reporting period. The average price of praseodymium and neodymium oxide increased by 92.11% year-on-year from 31.0 to 596000 yuan / ton, of which the average price of Q4 praseodymium and neodymium oxide was 772000 yuan / ton, with a year-on-year increase of + 107.66% and a month on month increase of + 30.49%. 2) Volume: in 21 years China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) obtained 100400 tons of REO (YoY + 36.44%), 42100 tons of rare earth oxides (YoY + 95.55%), 74200 tons of rare earth salts (YoY + 15.87%) and 20400 tons of rare earth metals (YoY + 16.27%).
3) cost: the main cost of the company is the purchase cost of rare earth concentrate. According to the company's agreement with Inner Mongolia Baotou Steel Union Co.Ltd(600010) agreement, the purchase price of rare earth concentrate in 21 years is 16300 yuan / ton (REO = 51%), with a year-on-year increase of 30%, and the change range is less than that of rare earth product price. To sum up, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) achieved a gross profit of 8.465 billion yuan in 2021, with a year-on-year increase of 239%; Among them, Q4 achieved a gross profit of 2.983 billion yuan in a single quarter, a year-on-year increase of 257% and a month on month increase of 56.95%, which is the main reason for the change of the company's performance.
The cost rate remained stable during the period. In 2021, the company's period expenses increased by 28% year-on-year to RMB 1.622 billion, and the period expense rate decreased by 0.63 PCTs year-on-year from 5.96% to 5.33%. Specifically, the sales expenses increased by 10% year-on-year to 76 million yuan, and the expense rate decreased by 0.07 PCTs year-on-year from 0.32% to 0.25%; Administrative expenses increased by 36% year-on-year to 993 million yuan, and the rate of administrative expenses decreased by 0.17 PCTs year-on-year from 3.44% to 3.27%; The financial expenses increased by 9.31% year-on-year to 392 million yuan, and the financial expense rate decreased by 0.40 PCTs year-on-year from 1.69% to 1.29%; R & D expenses increased by 49% year-on-year to 161 million yuan, and the R & D expense rate decreased by 0.02 PCTs year-on-year from 0.51% to 0.53%.
Reshape the supply and demand pattern of the industry. Since March, the price of praseodymium and neodymium oxide in China has gradually dropped from the high point of 1.1 million yuan / ton to 820000 yuan / ton. The overall decline is large. On the one hand, it is related to the rare earth office's interview with key enterprises such as China rare earth group and China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) and on the other hand, it is related to the de warehousing of downstream magnetic material enterprises, which has an impact on the production of terminal vehicle enterprises. In terms of lengthening the cycle, under the background of carbon neutrality, the demand for new energy vehicles, industrial energy-saving motors and other fields has exploded, and the growth rate of industry demand is expected to be about 15%. On the supply side, the high rare earth price will not lead to the disorderly release of the supply side. China's rare earth supply is controlled by indicators. Overseas mines such as mtpass, Lynas and Myanmar do not have large capital expenditure plans, and the rare earth supply is lack of flexibility. We maintain the judgment that supply exceeds demand.
The rare earth leader moves from cycle to growth - the sustainability of high growth has not been fully recognized by the market. The investment logic of rare earth industry in the 21st year pays more attention to "price", and the logic of "quantity" will be switched in the 22nd year. According to the 21 year rare earth quota issued by the Ministry of industry and information technology, China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) accounts for 96% of the increment of rare earth index. Considering environmental protection, mining and metallurgy capacity and other objective factors, it is not too much to position China Northern Rare Earth (Group) High-Tech Co.Ltd(600111) as a major growth source in the world. We expect its output to reach an average annual compound growth rate of 30-40%, and the valuation of rare earth leader is expected to be reshaped.
Profit forecast and investment suggestions: assuming that the average price of praseodymium and neodymium oxide in 20222023 is 850000 yuan / ton, according to the latest purchase price and agreement of rare earth concentrate, the price of rare earth concentrate is 26700 yuan (excluding tax, REO = 51%), we expect the net profit of the company in 2022 / 2023 / 2024 to be 10, 13.1 and 16.1 billion yuan respectively. According to the closing price on April 14, 2022, the market value of the company is 128.7 billion yuan, and the corresponding PE in 22-24 years is 12.8, 9.8 and 8.0x respectively. Maintain the company's "buy" rating.
Risk tips: the risk of industrial policy change, the risk of exceeding the expected release at the supply end, the risk of less than expected demand, the risk of untimely update of the public data used in the research report, the risk of deviation in demand calculation, etc.
