CNRE(SH:600111) Guolian Securities·2024-02-22 16:00Investment Rating - The report maintains a "Buy" rating for the company [7]. Core Views - The company's performance is under short-term pressure due to declining rare earth prices, with a projected net profit decrease of 61.00%-63.67% year-on-year for 2023 [1][2]. - The company is expected to benefit from the optimization of the supply-demand structure in the rare earth industry in 2024, which may lead to a rebound in prices [4]. - The company has significant resource advantages in rare earth raw materials, which could provide earnings elasticity [5]. Financial Performance Summary - The company expects a net profit of 2.17 billion to 2.33 billion yuan for 2023, a decline of 61.00%-63.67% year-on-year [1]. - The projected net profit for Q4 2023 is approximately 870 million yuan, down 35.7% year-on-year [2]. - The average price of praseodymium-neodymium oxide in 2023 is expected to be 530,600 yuan per ton, a decrease of 35.74% year-on-year [2]. - The company's revenue for 2023 is estimated at 26.33 billion yuan, a decrease of 29.33% compared to 2022 [6]. Production Capacity and Projects - The company has a rare earth mining capacity of 166,700 tons and a separation capacity of 152,200 tons, accounting for 69.44% and 66.19% of national quotas, respectively [3]. - Key projects, including green smelting upgrades, are expected to enhance production capacity, with the first phase of a project set to commence in Q4 2024 [3]. Market Outlook - The Ministry of Industry and Information Technology has set the first batch of rare earth mining and separation quotas for 2024 at 135,000 tons and 127,000 tons, respectively, indicating a slower growth rate compared to previous years [4]. - The supply growth in the rare earth sector is expected to slow down while demand continues to grow, potentially leading to a favorable supply-demand balance and price recovery [4]. Earnings Forecast - The projected net profits for the company from 2023 to 2025 are 2.20 billion, 2.85 billion, and 3.41 billion yuan, respectively, with corresponding EPS of 0.61, 0.79, and 0.94 yuan [5]. - The target price for the company's stock is set at 23.65 yuan, based on a 30x PE ratio for 2024 [5].