中国稀土行业 - 处于上行周期早中期，给予北方稀土 “买入” 评级、中国稀土 “中性” 评级-China Rare Earths-Early-to-Mid Upcycle Initiate NRE at Buy and CRE at Neutral

Summary of the Rare Earths Industry Conference Call Industry Overview - The rare earths industry is recognized as a strategic sector crucial for the global transition to green energy, advanced manufacturing, and defense [1][2] - The sector is currently in an early-to-mid upcycle, driven by disciplined Chinese supply, favorable policy momentum, and resilient demand from electric vehicles (EVs) and renewable energy [2][12] Price Trends - Short-term prices are expected to remain firm due to tight supply and geopolitical risks, with a higher but stable price range anticipated mid-term as new capacity comes online [3][16] - Light Rare Earth Elements (LREEs) have seen price easing from 2022 peaks but remain above previous lows, while Heavy Rare Earth Elements (HREEs) maintain firm pricing due to tight supply [2][3] Company Analysis Northern Rare Earth (NRE) - Initiated with a Buy rating and a target price of Rmb72, reflecting its leading resource position and integrated product chain [1][5] - NRE is the largest LREE producer in China, benefiting from captive access to Bayan Obo resources and a vertically aligned value chain [5][23] - Current trading metrics: 54.9x 2026E P/E and 7x 2026E P/B, with a projected ROE of 9.3%/13.5%/16.6% for 2025E/26E/27E [24] China Rare Earth (CRE) - Initiated with a Neutral rating and a target price of Rmb61.6, due to its smaller scale and limited integration [1][6] - CRE is strategically important for HREEs but trades at a higher multiple than NRE, which is viewed as excessive [6][25] - Current trading metrics: 90.5x 2026E P/E and 11.1x 2026E P/B, with a forecasted ROE of 7%/12%/15% for 2025E/26E/27E [26] Valuation Insights - NRE and CRE are valued at +2 standard deviations and +1.5 standard deviations above their historical average P/B multiples, respectively, reflecting the sector's upcycle [4][21] - The valuation approach considers structural demand growth, tighter resource control, and stronger policy support [21][22] Key Risks - Risks include demand fluctuations in downstream applications, capacity expansion outside China, trade barriers, price volatility, and potential emergence of substitute materials [27][28] - Policy adjustments in China could significantly impact supply, costs, and profitability [28] Conclusion - The rare earths sector is positioned for growth, with NRE favored for its robust fundamentals and strategic resource access, while CRE is seen as less attractive due to its valuation and earnings volatility [20][25]