2 1 Shi Ji Jing Ji Bao Dao·2025-10-13 23:40Core Viewpoint - The rare earth sector has experienced a significant rebound after a collective pullback in September, with a notable increase in stock prices driven by improving demand and strategic value in rare earth products [1][2]. Group 1: Market Performance - On October 13, the Wind rare earth index rose by 9.49%, leading all popular concept sectors, with several stocks, including Baotou Steel and Northern Rare Earth, hitting the daily limit [1]. - Northern Rare Earth's stock has surged over 170% year-to-date, with its current valuation reaching 75 times the expected annual profit of 2.8 billion yuan [1][2]. Group 2: Industry Dynamics - Despite the stock market's enthusiasm, the rare earth industry remains rational, with prices for various rare earth products, except for dysprosium, showing a downward trend [2]. - Baotou Steel, despite being the largest rare earth raw material base globally, derives only a small portion of its revenue from rare earth products, with steel products accounting for 77% of its total revenue in 2024 [2][4]. Group 3: Profitability Trends - Northern Rare Earth's net profit for the first three quarters is projected to be between 1.51 billion and 1.57 billion yuan, reflecting a year-on-year increase of 272.54% to 287.34% [2][3]. - The profit growth rate for Northern Rare Earth is considered typical for the basic materials sector and does not stand out significantly [4]. Group 4: Historical Context - Northern Rare Earth's profits have not returned to the historical peak levels of over 5 billion yuan in 2021 and 2022, yet its stock price is nearing the 2021 high [5][6]. - Other companies in the sector, such as China Rare Earth and Guangsheng Nonferrous, have also seen their stock prices exceed the 2021 cycle highs [7]. Group 5: Regulatory Impact - Recent export control measures by the Ministry of Commerce have expanded the scope of restrictions on rare earth-related items, which may strengthen supply rigidity in the market [8][9]. - Since the announcement of these measures, the rare earth sector has experienced a continuous upward trend, with the Wind rare earth index increasing by approximately 14% [9]. Group 6: Valuation Concerns - The current valuations of rare earth companies are exceptionally high, with estimates for China Rare Earth, Guangsheng Nonferrous, and Shenghe Resources at 177 times, 83 times, and 52 times, respectively [10]. - The valuation re-evaluation in the sector has already begun, raising concerns about potential overvaluation [11].