\u3000\u3 China Vanke Co.Ltd(000002) 645 Jiangsu Huahong Technology Co.Ltd(002645) )
Event: the company released the first quarterly report of 2022: the company achieved a revenue of 2.35 billion yuan in 2022q1, a year-on-year increase of 70%; The net profit attributable to the parent company was 254 million yuan, a year-on-year increase of 89%.
Comments:
The performance is brilliant and the profit growth continues to be realized. The net profit attributable to the parent company in Q1 of 2022 was 254 million yuan, which was in the median value of the previously released performance forecast, exceeding our previous expectations. The net profit attributable to the parent company in 2021q4 is 140 million yuan. The company has achieved continuous growth for three consecutive quarters from 2021q2 to 2022q1. As a leader in rare earth resources, the company has achieved continuous profit growth.
The company is expected to take the lead in benefiting from the abolition of the restriction policy. In November 2021, Jiangxi provincial government issued a document abolishing the notice of the general office of Jiangxi Provincial People’s Government on Further Strengthening the production, operation and management of rare earth. The abolition of the document means that the approval of new rare earth recovery projects is possible; As the leader of rare earth resource recovery in the industry, the company is expected to take the lead in benefiting.
Continuous expansion of recycling territory: starting from the acquisition of Xintai technology in 2020, the company completed the acquisition of 100% equity of Jiangxi Wanhong (6000 tons of waste magnetic materials can be processed in 2021) in May 2021; In addition, the company said in the investor’s Q & A in February 2022 that the company is actively promoting the approval of Wanhong’s remaining 6000 tons of production capacity.
Rare earth industry: embracing new energy + energy conservation, the boom continues: benefiting from the boom in downstream demand, rare earth prices remain high; Even after seasonal adjustment, the average price of praseodymium and neodymium oxide in April was still as high as 860000 yuan / ton, still at an all-time high; At present, the inventory of rare earth praseodymium oxide is only 3411%, with a year-on-year decline of 16%. In the medium and long term, the downstream demand, especially new energy vehicles and industrial motors, continues to be high; The supply of rare earth is subject to a quota system. Especially compared with the rapidly growing demand, the gap between supply and demand is difficult to alleviate in the short term, and the price of rare earth is expected to remain high for a long time.
Traditional business: stable operation. The order volume of scrap processing equipment of the company has achieved rapid growth, and the operation business of renewable resources has also achieved new breakthroughs. The company’s elevator parts business has overcome multiple adverse factors such as the shortage of key raw materials and the rise of commodity prices, and the company’s profitability has remained stable.
Profit forecast and investment rating: we predict that the company’s revenue from 2022 to 2024 will be 9.1/11/12.1 billion yuan respectively, with a year-on-year increase of 34% / 21% / 10%; Based on the company’s 2022q1 performance, we raised the company’s net profit attributable to the parent company from 6.8/8.0 to 8.5/1.06 billion yuan from 2022 to 2023, that is, the company’s net profit attributable to the parent company from 2022 to 2024 was 8.5/10.6/1.22 billion yuan, a year-on-year increase of 60% / 24% / 15%, and the corresponding PE was 11 / 9 / 8x respectively. Considering the continuous prosperity of rare earth industry, the company’s recycling business continues to promote and the profit continues to grow, which can be expected; As the leader of rare earth resources, the company should enjoy higher valuation compared with the standard rare earth industry, so it maintains the “buy” rating of the company.
Risk tip: rare earth price fluctuation; The company’s business expansion was less than expected.
