Zhongke Sanhuan (000970): Demand stabilizes, Q2 rare earth prices increase and prices lead to profitability

Zhongke Sanhuan (000970): Demand stabilizes, Q2 rare earth prices increase and prices lead to profitability

2019H1 returns to mother net profit1.

00 ppm, a reduction of 10 per year.

66%, slightly lower than expected The company disclosed the semi-annual report for 2019, and realized revenue of 18 in the reporting period.

80 ppm, a reduction of 4 per year.

48%; net profit attributable to mothers1.

00 ppm, a reduction of 10 per year.

66%, slightly lower than expected; mainly due to the rapid rise in raw material costs in the second quarter of 2019, resulting in a decline in gross profit margin.

During the reporting period, the company plans to invest in Southern Rare Earth. We are optimistic about the company’s layout of raw material resources and its leading position in the field of magnetic materials. We expect that the sales of new energy vehicles will increase in the future, and the demand for magnetic materials will improve, and the company’s performance is expected to gradually improve. Annual company EPS is 0.

28/0.

30/0.

33 yuan, maintaining the “overweight” level.

The cost of rare earth raw materials increased in Q2 2019, and the increase in costs caused gross profit margin restructuring to achieve revenue in Q2 20199.

60 trillion, net profit attributable to mother 0.

56 ‰, a decrease of 19 per year.

97%, an increase of 27 from the previous month.

27%; Q2 gross margin is 1 lower than Q1.

19pct, net interest rate increased by 1 over Q1.

06 points.

Mainly due to the rapid rise in the price of rare earth raw materials in the second quarter of 2019.

According to Baichuan Information, in the second quarter of 2019, the prices of praseodymium oxide and neodymium rose by 23%, erbium oxide rose by 31%, and praseodymium oxide rose by 32%. The increase in raw material prices was catalyzed by Sino-US trade friction, and the remaining national strategic resources were threatened.Suffering from the impact of imported minerals in Myanmar, the supply of medium and heavy rare earths is tightening.

In addition, in the past 18 years, domestic large and medium-sized magnetic materials companies have shown an increase in revenue and a significant increase in gross profit margin. We expect the concentration of the industry to increase and competition to increase.

It plans to acquire shares in Southern Rare Earth, extend the upstream industrial chain, and ensure the supply of raw materials, especially medium and heavy rare earths. On April 21, the company announced with Southern Rare Earth Rare Earth’s “Letter of Intent to Cooperate.”Invested in the establishment of an advanced sintered NdFeB company with a capacity of 5,000 tons per year.

Southern Rare Earth is one of the six major rare earth groups approved by the State Council. It is the largest medium and heavy rare earth production and management company in the upstream and has obvious advantages in the field of rare earth production and rare earth trading.

With this cooperation, the company will further ensure the supply of rare earth raw materials (especially heavy rare earth), which is of great significance to enhance the company’s competition in new energy vehicles and other fields.

In 17-18, due to environmental inspections, some heavy-duty rare earths in China were shut down or resource grades were depleted. There were no expansion mining and new approval certificates, and Myanmar ‘s imported ore, which is an important supplement for heavy-duty rare earths, continued to be wasted, causing 2019H1 heavy-duty rare earths.Price increase.

The increase in sales of new energy vehicles is expected to drive the demand for magnetic materials mainly around the market expansion of new energy vehicles, rail transportation equipment, energy-saving appliances, high-end CNC machine tools and robots.

The company has completed the certification of motor and magnetic materials for mainstream 杭州桑拿网 new energy vehicle companies, including Tesla and mainstream domestic and foreign enterprises. We expect that sales of magnetic materials for new energy vehicles will increase in 19-21.

Cooperation between our magnetic industry legislative companies and industry leaders has been strengthened.

The leader of magnetic materials has been developing steadily, and the demand for new energy vehicles has improved. We maintain our original profit forecast for the “overweight” rating. It is expected that revenue will reach 45 in 19-21.

55/49.

65/54.

2.3 billion, net profit attributable to mother 3.

00/3.

19/3.

5 billion.

In 2019, the magnetic material company’s wind consensus expected that the median PE was 41X. Considering the company’s leading position and forecasting the development of upstream resources, new energy vehicles are also expected to drive the demand for magnetic materials. We give a certain estimated premium and give 42 based on 19 years of net profit.-44XPE, cut target price to 11.

76-12.

32 yuan (previous value was 12.32-12.

88 yuan), maintaining the “overweight” level.

Risk warning: Sino-US trade friction caused excessive fluctuations in rare earth prices; sales of new energy vehicles fell short of expectations.