Zhong Ke San Huan: H1 Net Profit Up 11.88% YoY, Core Product Sales Up YoY etc.

On July 21, the stock price of Zhong Ke San Huan rose, and as of the close on the 21st, it was up 4.36% to 12.69 yuan per share.

In terms of news, the H1 2026 earnings flash report released by Zhong Ke San Huan on the evening of July 20 showed: In H1, the company achieved operating revenue of 3,613.77 million yuan, up 23.67% YoY; total profit of 102.80 million yuan, up 1.18% YoY; net profit attributable to shareholders of the listed company of 49.22 million yuan, up 11.88% YoY; and after deducting non-recurring gains and losses such as government subsidies, net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses of 32.30 million yuan, up 2.25% YoY.

Zhong Ke San Huan's semi-annual earnings flash report showed: In H1 2026, facing increasingly fierce market competition and a complex and volatile external environment, through the joint efforts of all employees, the company's core product sales increased YoY, and through cost reduction measures such as optimizing formula processes and reducing heavy rare earth usage, the overall gross margin improved YoY; some subsidiaries improved their operations, achieving loss reduction or turnaround; meanwhile, the company further improved inventory management, optimized the inventory structure of key raw materials, and asset impairment losses decreased YoY. Due to the appreciation of the RMB against the US dollar and euro, the company incurred exchange losses during the reporting period, and finance costs increased YoY, partially offsetting the profit growth.

In a recent survey response, Zhong Ke San Huan stated that over the years, the company has continuously improved and optimized heavy rare earth reduction technologies such as grain refinement, grain boundary diffusion, and grain boundary regulation, and achieved combined application of multiple technologies, continuously reducing the heavy rare earth usage in high-performance magnets, lowering material costs, and striving to enhance the market competitiveness of its products.

In a survey response, Zhong Ke San Huan stated that the company has strengthened its management of concentrated raw material procurement and dynamically adjusts inventory based on actual conditions, currently holding 1-2 months' worth of rare earth raw material inventory.

According to its previously released 2025 annual report, in 2025, facing a complex and volatile external environment and increasingly fierce industry competition, the company's management and all employees worked together to continuously optimize operations and management, actively take effective measures such as cost reduction and efficiency improvement, and strive to promote stable operations and healthy development, achieving significant YoY growth in operating results. Exchange gains increased by a certain extent YoY, while asset impairment losses decreased significantly YoY. During the reporting period, the company achieved operating profit of 176.57 million yuan, up 372.87% YoY; total profit of 179.89 million yuan, up 379.71% YoY; net profit attributable to shareholders of the listed company of 91.32 million yuan, up 660.50% YoY; and after deducting non-recurring gains and losses such as government subsidies, net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses of 60.61 million yuan, up 451.03% YoY.

Regarding the Company's main business and product applications, Zhong Ke San Huan stated in its 2025 annual report: The Company's principal products are sintered NdFeB and bonded NdFeB permanent magnet materials, widely used in new energy vehicles (NEVs), automotive motors, consumer electronics, robots, industrial motors, energy-saving elevators, inverter air conditioners, and wind power generation, among other fields. Against the backdrop of the low-carbon economy sweeping the globe, countries worldwide are focusing on environmental protection and low-carbon emissions as key technology areas. Rare earth permanent magnet materials, represented by sintered NdFeB and bonded NdFeB, play a vital role in establishing a complete low-carbon emission reduction green industry chain. Humanoid robots and the low-altitude economy are two major emerging demand growth poles for high-performance NdFeB. The former boosts explosive growth in high-end magnetic materials through joint servo motors, while the latter, driven by eVTOLs and drones, expands demand for high-power-density magnetic materials. Together, they reshape the demand structure and technological direction of rare earth permanent magnets. Currently, the humanoid robot industry has yet to achieve large-scale mass production. Once commercial deployment is realized, it will have a positive impact on the NdFeB permanent magnet materials industry and the Company. During the reporting period, the Company focused on R&D of high-performance magnets for humanoid robots to capture market opportunities following their future commercial deployment. At the same time, it actively and continuously monitors developments in the low-altitude economy, striving to capture potential market opportunities.

Regarding the 2026 business plan, Zhong Ke San Huan stated: In 2026, the Company will closely align with its future development strategy, focus on core objectives, advance the implementation of key tasks, and drive sustained business improvement. (1) Continuously strengthen technology R&D, focusing on key R&D directions, intensifying efforts on core technology breakthroughs, promoting the industrial application of R&D outcomes, and enhancing product technology content and market competitiveness; improve R&D management and incentive mechanisms to stimulate the innovation vitality of R&D teams. (2) Optimize market development strategies, deepen engagement with core clients and key markets, actively expand into emerging application fields, improve sales channels and service systems, and increase the breadth and depth of market coverage; continuously optimize the market structure in and outside China to enhance market resilience against risks. (3) Deepen production and operations management, promote the intelligent and automated upgrading of production sites, optimize production processes and resource allocation to further reduce costs and increase efficiency; strengthen collaborative supply chain management to ensure stable raw material supply and cost control. (4) Advance digital transformation, expand the coverage of information system applications, improve the construction of business-finance integration, enhance data integration and analysis capabilities, and empower operations management and decision-making through digitalization. (5) Strengthen the talent and incentive system, continuously recruit key talent, improve talent development and career advancement pathways, and fully mobilize employee enthusiasm and creativity. (6) Strengthen compliance management, continuously monitor industry policy changes, dynamically optimize the compliance management system, and ensure all business activities strictly comply with laws, regulations and regulatory requirements.

When discussing potential raw material supply and price risks, Zhong Ke San Huan stated in its 2025 annual report: Rare earth raw materials are the core input for the company’s product production, and their supply is significantly affected by policies such as industry rectification and production controls, which may pose tight supply risks. At the same time, rare earth raw material prices are influenced by multiple factors including the international economic situation, policy adjustments, and market supply and demand, and price fluctuations may cause fluctuations in the company’s production costs, thereby impacting operating performance.

A review of the price performance of Pr-Nd alloy, an important raw material for NdFeB, in H1 this year shows: At the beginning of the year, Pr-Nd alloy was quoted at 740,000 yuan/mt. Driven by spot tightness of Pr-Nd oxide, downstream magnetic material enterprises’ stockpiling purchases around Chinese New Year, and other supply-demand fundamental factors, it surged rapidly to hit a high of 1.09 million yuan/mt by end-February, with cumulative gains of 47.3%. In March, a substantial contraction in end-use demand coupled with spreading bearish market news pulled the price back quickly to around 900,000 yuan/mt. In April, supported by rising concentrate prices boosting oxide costs, production halts at some separation plants, and the release of export orders during the export control window, the price recovered and rebounded to 999,000 yuan/mt. From May to June, downstream industries entered the traditional off-season, and magnetic material enterprises reduced their inquiries and purchases of Pr-Nd alloy, leading to a second bottoming at 830,000 yuan/mt. In mid-to-late June, large-scale production cuts at scrap recycling enterprises due to tax invoice issues tightened supply expectations, driving Pr-Nd prices to bottom out and close at 905,000 yuan/mt on June 30. The average price in H1 was about 905,000 yuan/mt, with a fluctuation range of 48.3%.

According to SMM’s latest quotation, on July 21, the price of Pr-Nd alloy was 915,000-925,000 yuan/mt, with an average price of 920,000 yuan/mt, down 0.54% from the previous trading day.

Currently, the overall rare earth market is showing a weak price trend. Focusing on the Pr-Nd market, futures prices of Pr-Nd oxide have pulled back, while market inquiry prices are low. Affected by these two factors, suppliers of Pr-Nd oxide have slightly lowered their quotes. However, factory quotes remain relatively firm, and low-priced cargoes are still hard to find in the market. In the metal market, prices have also declined in tandem, but market inquiries have not improved as a result. Downstream magnetic material enterprises are cautious in procurement, mainly purchasing through restocking to meet rigid demand. Intense bargaining between upstream and downstream players has led to a stalemate in actual transactions. In the short term, affected by the stalemate in market trading, Pr-Nd product prices are expected to move sideways.