Company Reports

JL Mag reported disappointing first-quarter results with revenue and net profit, both accounting for 16% of our previous full-year forecast, below our expectations. Due to an extended price drop in various rare earth materials during the quarter, hence increasing price pressure for the company’s rare earth magnet products, the gross margin edged down another 4 percentage points sequentially.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. Its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

JL Mag reported disappointing fourth-quarter results, with both revenue and net profit below our expectations. Amid extended price drops in various rare earth materials, gross margin edged down 4 percentage points sequentially, ending the recovery trend witnessed in the first three quarters. We have seen increasing price pressure for the company’s rare earth magnet products during the quarter. With the increase in selling, administrative, and research expenses, fourth-quarter net profit dropped 57% quarter over quarter to merely CNY 69 million.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. Its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

Narrow-moat JL Mag reported disappointing third-quarter results. Revenue and net profit in the first nine months accounted for only 60% and 70% of our full-year forecast, respectively. Amid declining prices of various rare earth materials during the period, we see increasing price pressure for the company’s rare earth magnet products. As a result, revenue from new energy vehicle, or NEV, customers recorded its first year-over-year decline since 2021. With a rise in selling, general and administrative, and research expenses, third-quarter net profit dropped 27% year over year to CNY 162 million.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2022, its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

Narrow-moat JL Mag reported in-line second-quarter revenue with robust demand growth from new energy vehicles, or NEV, customers offsetting decline in other segments. Gross margin recovery was slower than expected due to extended price drops in various rare earth materials. Despite stringent cost control in selling and administrative expenses, second-quarter net profit dropped 49% year over year to CNY 154 million.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2022, its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

We have addressed an incorrect display of the fair value estimate of JL Mag Rare-Earth's H-shares. The A-share fair value is displayed correctly. There is no impact on our ratings and opinion of JL Mag Rare-Earth.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2022, its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

Narrow-moat JL Mag reported in-line first-quarter revenue, but the gross margin recovery pace was slower than expected. While first-quarter net profit was up 9% year over year to CNY 178 million, it was lifted by one-off gains. Excluding nonrecurring items, core net profit declined 19% from the prior-year quarter. We reduce our fair value estimate to HKD 27 (CNY 24) from HKD 28 (CNY 25), which implies a 2023 P/E ratio of 25 times on 23% 2022-25 net profit CAGR. At the current price, H-shares are trading at Morningstar 4-star territory. The A-shares, at a 37% premium to its H-shares, are fairly valued.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2022, its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

Narrow-moat JL Mag reported mixed fourth-quarter results. Revenue expanded 68% year over year, in line with the preliminary range. However, despite top-line growth, net profit for the quarter declined 84% year over year to CNY 16 million. While the quarterly profit nears the low end of company’s guidance, gross margin for the quarter was weaker than expected. We cut our 2023-24 net profit estimates by 2% and 6%, respectively, and lower our fair value estimate to HKD 28.00 (CNY 25.00) from HKD 29.00 (CNY 26.50). Our fair value implies a 2023 P/E ratio of 24 times, which is justified by 24% 2022-25 net profit CAGR. At the current price, H-shares are trading in 4-star territory. The A-shares, at a 28% premium to its H-shares, are fairly valued.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2022, its major customers included all of the top 10 players in the global NEV sector by sales volume, four of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

Narrow-moat JL Mag reported mixed quarterly results. While third-quarter net profit was up 70% year over year to CNY 223 million, at the midpoint of company’s preliminary results, gross margin for the quarter was weaker than expected. The fact that the first nine months net profit accounted for 77% of our full-year forecast but gross margin missed indicates the quarterly profit was lifted by one-off items. We cut our 2022-24 revenue estimates by 5%-10% and net profit forecasts by 0%-14%. We lower our fair value estimate to HKD 29.00 (CNY 26.50) from HKD 36.00 (CNY 30.50). Our fair value implies a 2023 P/E ratio of 24 times, which is justified by 31% 2021-24 net profit CAGR. At the current price, H-shares are trading at 21% discount to our fair value, which is attractive, in our view. The A-shares, at 34% premium to its H-shares, are fairly valued.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, by production volume in 2020 with a market share of 14.5%, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2020, its major customers included four of the top five players in the global NEV sector by sales volume, three of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.

JL Mag Rare-Earth reported in-line preliminary third-quarter results, with the midpoint of the first nine months of net profit accounting for 77% of our full-year profit forecast. Strong profit growth of 95% year over year was mainly due to robust demand from downstream new energy vehicle, or NEV, customers. We maintain our fair value estimate at HKD 36 (CNY 30.50). Our fair value implies a 2023 P/E ratio of 25 times, which is justified by 38% 2021-24 net profit CAGR. At the current price, H-shares trade at 35% discount to our fair value—attractive, in our view. The A-shares, at 37% premium to its H-shares, are fairly valued.

Narrow-moat JL Mag reported solid interim results with first-half net profit up a decent 111% year over year to CNY 464 million, at the midpoint of the company’s preliminary results. The significant growth was underpinned by robust demand from downstream new energy vehicle, or NEV, customers.

Narrow-moat JL Mag Rare-Earth reported stronger-than-expected preliminary interim results with the midpoint of first-half net profit up 115% year over year due to robust demand from downstream new energy vehicle customers. We raise our fair value estimate to HKD 36.00 (CNY 30.50) from HKD 30.00 (CNY 25.50). Our fair value implies a forward 2023 P/E ratio of 25 times, which is justified by 38% 2021-24 net profit CAGR. At the current price, H-shares are trading at a 20% discount to our fair value, which is attractive in our view. The A-shares, at a 34% premium to its H-shares, are fairly valued.

JL Mag Rare-Earth is the world’s largest producer of high-performance rare earth permanent magnets, or REPMs, by production volume in 2020 with a market share of 14.5%, according to Frost & Sullivan. The company started producing high-performance NdFeB PMs used for wind turbines in 2010; for energy-saving variable-frequency air-conditioners, or VFACs, in 2011; and for new energy vehicles, or NEVs, in 2012. In 2020, its major customers included four of the top five players in the global NEV sector by sales volume, three of the top five players in the global wind power sector by newly added installed capacity, and the top two household air-conditioner producers by production volume in China.