Shenghe Resources’ revenue/attributable net profit (NP) were RMB2,803/161mn for 3Q24 (-38.38/+117.46% yoy, +9.85/+0.75% qoq). For 9M24, revenue/attributable NP/recurring NP were RMB8,241/92.87/83.60mn (-37.12/-41.29/-7.30% yoy). We expect its earnings to improve with a stabilization in rare earther prices. We are upbeat on its efforts to increase raw material self-sufficiency rate. Maintain BUY.

　　盛和资源发布三季报：Q3实现营收28.03亿元（yoy-38.38%，qoq+9.85%），归母净利1.61亿元（yoy+117.46%，qoq+9.75%）。2024年Q1-Q3实现营收82.41亿元（yoy-37.12%），归母净利9286.96万元（yoy-41.29%），扣非净利8359.56万元（yoy-7.30%）。公司业绩将受益于稀土价格止跌企稳，同时积极布局资源提升原料自给率，维持“买入”评级。
　　稀土涨价和所得税税率下降帮助公司Q3业绩环比改善
　　稀土涨价助公司毛利率回升和所得税税率下降帮助公司Q3业绩环比改善。公司Q3毛利率8.00%，环比+4.98pct，公司三季度盈利环比改善，主要原因为三季度氧化镨钕价格均价为39.00万元/吨，环比增加2.12%。费用方面，公司24Q3合计期间费用率为3.32%，环比+1.46pct，主要系三季度管理费用和财务费用环比+104.23%/+145.54%。24Q3资产减值回冲约0.53亿元，环比减少0.54亿元；期间所得税税率13.23%，环比下降11.24pct。
　　公司积极布局海外资源，努力提升未来原料自给率
　　公司今年7月与Peak公司签署投资、资金和开发等条款清单，以支持Ngualla项目开发；预计该项目将在2026年初建成投产，初期预计年产折合氧化物1.8万吨稀土精矿，对应氧化镨钕约4000吨。此外，公司连云港钛锆工厂目前产能利用率较低，为提升原料保障能力，公司上半年收购了StrandlineResources公司和嘉成矿业，两家公司在坦桑尼亚和马达加斯加布局了重砂矿项目，坦桑尼亚项目具备短期内运营投产的条件。
　　25年稀土供需关系或改善
　　8月20日，工信部、自然资源部发布2024年第二批稀土开采、冶炼分离总量控制指标分别为13.5万吨/12.7万吨。2024年前两批累计较去年第二批发布后指标同比增长12.5%/10.4%，进一步确认了国内稀土指标增速收敛的趋势。需求端根据中汽协数据，24年1-9月国内新能源车消费累计同比+32.53%，“以旧换新”政策效果逐步显现，同时海外新能源汽车消费增速在25年或实现修复。因此我们判断25年稀土供需或改善。
　　给予目标价15.81元
　　我们维持盈利预测，预计公司24-26年归母净利为5.29亿元、9.12亿元和10.97亿元，同比增速分别为+58.97%、+72.51%、+20.21%。可比公司2025年PE均值30.4X，给予公司2025年30.4XPE，对应目标价15.81元（前值11.01元）。
　　风险提示：电子、电机等下游走弱导致稀土价格下跌，产量不及预期等。

Attributable net profit fell 181.59% yoy in 1H24, maintain BUY
Shenghe Resources (Shenghe) reported 1H24 revenue/attributable net profit (NP)/recurring NP of RMB+5,438/-68.52/-70.52mn (-36.45/-181.59/-351.19% yoy), with 2Q24 revenue/attributable NP at RMB2,552/147mn (-32.02/+2128.67% yoy, -11.57/+168.22% qoq). We estimate 2024/2025/2026 EPS at RMB0.30/0.52/0.63 (previous: RMB0.42/0.65/0.73), and value the stock at 36.7x 2024E PE, at par with its peers' average on iFind consensus. Our target price is RMB11.01 (previous: RMB14.92). Maintain BUY.
Rapid growth in output & sales of rare earth oxides/metals in 1H24
In 1H24, Shenghe produced 14,156.74/12,549.74/9,749.30 tonnes (+129.74/+52.37/-24.72% yoy) of rare earth oxides/metals/concentrates, with sales volume at 7,843.51/7,551.68/16,928.76 tonnes (+67.32/+20.13/-27.64% yoy). Overall gross profit margin (GPM) was 1.47/3.02% in 1H24/2Q24 (-3.22pp yoy/+2.93pp qoq). Overall expense ratio for 1H24 stood at 2.26%, up 0.78pp yoy.
Profit turned positive on stabilizing rare earth prices in 2Q24
During 1H24, Shenghe saw sales increases in its major products, but faced challenges from significantly lower market prices for main rare earth products, weaker market prices for zircon abd titanium products, and lagging cost changes for raw materials such as imported rare earth concentrates and beach sands. These factors led to a substantial yoy decrease in average selling prices (ASPs) and GPMs, causing a yoy decline in profits. In 2Q24, the company's earnings turned profitable, which we attribute mainly to the stabilization of rare earth ASPs, with a 2.93pp qoq increase in GPM.

　　24H1公司归母净利同比-181.59%，维持买入评级
　　盛和资源发布半年报，2024年H1实现营收54.38亿元（yoy-36.45%），归母净利-6851.70万元（yoy-181.59%），扣非净利-7052.10万元（yoy-351.19%）。其中Q2实现营收25.52亿元（yoy-32.02%，qoq-11.57%），归母净利1.47亿元（yoy+2128.67%，qoq+168.22%）。我们预计公司2024-2026年EPS分别为0.30、0.52、0.63元（前值2024-2026年0.42、0.65、0.73元）。可比公司24年iFind一致预期PE均值为36.7倍，给予公司24年36.7倍PE，目标价11.01元（前值14.92元），维持“买入”评级。
　　公司上半年稀土氧化物、稀土金属产销均实现迅速增长
　　24H1公司实现稀土氧化物、金属、精矿产量14156.74/12549.74/9749.30吨，同比+129.74%/+52.37%/-24.72%，实现稀土氧化物、金属、精矿销量7843.51/7551.68/16928.76吨，同比+67.32%/+20.13%/-27.64%。24H1公司综合毛利率1.47%，同比下降-3.22pct，其中24Q2毛利率为3.02%，环比+2.93pct。此外24H1公司合计期间费用率2.26%，yoy+0.78pct。
　　二季度稀土价格企稳，公司24Q2业绩已实现扭亏
　　报告期内，公司主要产品销量有所增长，但受主要稀土产品市场价格同比大幅下降，锆钛产品市场价格相对弱势运行，以及进口稀土精矿和海滨砂等原材料成本变动滞后等因素影响，公司主要产品销售均价及毛利率较上年同期大幅下降，导致公司本报告期利润较上年同期下降。公司24Q2业绩扭亏，我们认为主要是因为二季度稀土均价止跌企稳，公司二季度毛利率环比上升2.93pct。
　　公司通过并购弥补稀土冶炼和前端资源的短板
　　据8月21日公告，公司全资子公司晨光稀土与NEO国际公司签署了《股权转让协议》，收购江阴加华和淄博加华100%股权，两者均拥有稀土冶炼分离指标，对应产能分别为3800tREO/年和5500tREO/年。据8月9日公告，公司全资子公司晨光稀土收购SRUL公司100%股权项目协议约定的交割条件已成就，晨光稀土已完成协议约定款项的支付，交易各方已完成交割文件的签署，公司后续将推动完成股份过户等手续。SRUL公司持有NyatiMineralSandsLimited84%股权，该公司持有Fungoni、Tajiri、Sudi、Bagamoyo等四个重砂矿项目，前两者已获得采矿证。
　　风险提示：行业下游需求不及预期，行业竞争加剧导致产品售价承压。

1Q24 attributable NP amounted to negative RMB216mn, BUY Shenghe Resources (Shenghe) logged revenue/attributable NP of RMB+2,886/-216mn (-39.92/-378.59% yoy, -39.50/-223.50% qoq) for 1Q24. In light of the weaker-than-expected rare earth metal prices in 2024 ytd, we cut our assumptions for rare earth metal prices, and estimate 2024/2025/2026 EPS at RMB0.42/0.65/0.73 (previous: RMB0.48/0.65/0.73). We value the stock at 36x 2024E PE, on a par with its peers’ average on Wind consensus. Our target price is RMB14.92 (previous: RMB12.96). BUY.
Rise in output of some products failed to offset rare earth price fall
For 1Q24, sales volume of rare earth oxides/rare earth salts/rare earth metals/zircon sand/titanium ore changed by -24.95/+97.61/+19.33/+50.85/+6.9% yoy. According to Wind data, the average price of praseodymium-neodymium oxide fell 42.3% yoy or 21.9% qoq to RMB386k/tonne in 1Q24. As the sales volume expansion failed to offset the price decline, Shenghe’s sales GPM for 1Q24 fell 11.52pp yoy or 1.81pp qoq to 0.1%. For 1Q24, the overall expense ratio changed by -0.02pp yoy or +4.62pp qoq to 2.63%. Besides, credit/asset impairment losses stood at c. RMB48/134mn in 1Q24, straining corporate earnings.
1Q24 earnings fell
According to Wind, the average price of praseodymium-neodymium oxide, a typical rare earth oxide at home, stood at RMB386k/tonne in 1Q24, down by 42.3% vs 1Q23 (RMB669k/tonne) or 21.9% vs 4Q23 (RMB494k/tonne). In 1Q24, as Shenghe’s inventory turnover days stood at c. 140, asset impairment losses reached roughly RMB133.8mn. In addition, given the decline in rare earth ASP in 1Q24, coupled with the usage of high-cost raw materials obtained around one quarter earlier, gross profit for this quarter notably shrank qoq.
Peers’ 1Q24 earnings tanked qoq
For 1Q24, when rare earth prices came down and inventory turnover days stood at high levels, CNRE and China Minmetals Rare Earth, two rare earth leaders at home, recorded sharp qoq declines in net profit; specifically, China Minmetals Rare Earth registered attributable net loss of c. RMB289mn (asset impairment losses: c. RMB346mn), while CNRE’s attributable NP dropped c. 94.35% yoy or 94.74% qoq to c. RMB52mn. Rare earth prices stopped declining in March; given this, coupled with the continued earnings growth for sectors like household appliances, wind power and manufacturing, we expect the demand ramp-up to drive a rebound in rare earth prices. We believe the price of praseodymium-neodymium oxide could rally to over RMB450k/tonne.
Risks: sector-wide supply growth beating our expectations; soft demand.