JL MAG Rare-Earth: Humanoid Robot Magnetic Components Have Initial Mass Production Capability, High-Performance Magnetic Material Sales and Capacity Reach New Highs in 2024

The transcript of the online performance briefing released by JL MAG Rare-Earth on March 31 shows:

1. Please briefly introduce the company's full-year performance in 2024?

JL MAG Rare-Earth responded: In 2024, under the guidance of the company's core values of "customer orientation and value co-creation," the management team led the company to focus on its main business, overcoming the adverse factors of the significant decline and bottoming out of rare earth raw material prices since 2022, actively expanding business, and striving to expand and release capacity according to the strategic plan set by the board of directors. In 2024, rare earth raw material prices showed a downward trend YoY. The lag in raw material cost changes, coupled with intensified industry competition and other unfavorable factors, adversely affected the company's operating performance. The company's management promptly adopted effective response strategies, actively explored the market, and simultaneously expanded capacity, maintaining stable operations. During the reporting period, the company continued to focus on the new energy and energy-saving environmental protection fields, concentrating on core application areas such as NEVs and auto parts, energy-saving variable frequency air conditioners, wind power generation, robots and industrial servo motors, 3C, and low-altitude aircraft. In 2024, the company achieved operating revenue of 6.763 billion yuan, up 1.13% YoY. Among them, domestic sales revenue was 5.541 billion yuan, up 1.88% YoY; overseas sales revenue was 1.222 billion yuan, of which sales revenue to the Americas was about 418 million yuan. The company achieved net profit attributable to shareholders of the listed company of 291 million yuan, down 48.37% YoY; net cash flow from operating activities was 508 million yuan.

2. What were the company's production, sales, and product structure for the full year of 2024?

JL MAG Rare-Earth responded: In 2024, the company's capacity utilization rate exceeded 90%, with high-performance magnetic material blank production of about 29,300 mt, up 39.48% YoY, and high-performance magnetic material finished product sales of about 20,900 mt, up 37.88% YoY, setting a record high in the company's history. According to publicly available industry statistics, the company has become the top producer and seller in the rare earth permanent magnet industry both nationally and globally. In 2024, the company's sales revenue in the NEV, variable frequency air conditioner, and wind power generation fields was as follows:

3. What is the current progress of the humanoid robot and low-altitude aircraft businesses?

JL MAG Rare-Earth responded: In the humanoid robot field, the company is actively cooperating with world-renowned technology companies in the R&D and capacity building of humanoid robot magnetic components, with small batch deliveries; there are also small batch deliveries in the low-altitude aircraft field. In the humanoid robot field, 2025 marks the first year of development for humanoid robots. The company has upgraded the humanoid robot magnetic component technology R&D department to the humanoid robot magnetic component business unit, with the company's CEO concurrently serving as the strategic coordinator for this business unit. Currently, based on customer needs, the company has made various supporting investments, including project-specific workshops, equipment, and professional teams, and has initially established a certain scale of mass production capability. In the future, the company will continue to increase R&D investment in the humanoid robot magnetic component field, actively promote the industrialization of the project's hardware and software support, to meet the growing market demand.

4. What is the progress of the company's Baotou Phase III project?

JL MAG Rare-Earth responded: In January 2025, in response to the national policy of fully building "two rare earth bases," and based on future market demand for NEVs, variable frequency air conditioners, and humanoid robots, the board of directors decided to invest in the construction of the "20,000 mt/year high-performance rare earth permanent magnet material green intelligent manufacturing project." The project has a construction period of two years and is currently progressing as planned.

5. What were the main reasons for the YoY decline in the company's net profit in 2024?

JL MAG Rare-Earth responded: In 2024, rare earth raw material prices showed a downward trend YoY. Taking Pr-Nd alloy (including tax price) as an example, according to data released by the China Rare Earth Industry Association, the average price from January to December 2024 was 490,000 yuan/mt, down about 25% from the average price of 650,000 yuan/mt in the same period of 2023. The lag in raw material cost changes, coupled with intensified industry competition and other unfavorable factors, adversely affected the company's operating performance. In 2024, relying on relatively sufficient orders on hand, the company actively planned and laid out, improved capacity, coordinated group advantage resources, promoted the construction of projects such as JL Ningbo Technology and Jincheng Rare-Earth, and made extensive preparations for reaching full production, leading to a phased increase in the unit cost and management expenses of the above subsidiaries, which had a certain impact on net profit. Among them, JL Ningbo Technology's impact on consolidated net profit was about -57.56 million yuan. Despite the adverse impact of the decline in rare earth raw material prices, the company continued to invest in R&D, actively laid out the humanoid robot magnetic component field, promoted production management informatization and automation, reduced costs and increased efficiency. Additionally, some customers' locked-price orders signed when rare earth raw material prices were at a relatively high level were executed after Q3, and the company's profitability gradually improved in Q3 and Q4.

6. Please introduce the company's dividend situation and future dividend strategy?

JL MAG Rare-Earth responded: The company has always valued cash returns to shareholders. Since its listing in 2018, the company has implemented cash dividends every year. By the end of 2024, the cumulative cash dividends exceeded 1 billion yuan, accounting for more than 44% of the cumulative net profit attributable to the parent company. The company's 2024 profit distribution plan is to distribute a cash dividend of 1.2 yuan per 10 shares (including tax) to all shareholders, with an expected dividend amount of 164 million yuan. If this annual dividend is completed and implemented, combined with the company's 2024 interim cash dividend of 107 million yuan, the company's full-year cash dividend in 2024 will account for more than 90% of the company's 2024 net profit attributable to shareholders of the listed company. In the future, the company will continue to adhere to long-termism and reward investors with practical actions.

7. Does the company have sufficient orders to support its capacity expansion?

JL MAG Rare-Earth responded: The company adheres to the principle of "produce based on sales," promoting new capacity construction and release based on long-term orders and clear demand guidance from major customers. The company has established stable, long-term cooperative relationships with top-tier customers in the fields of NEVs, variable frequency air conditioners, and wind power, and has established a leading position in segmented markets. In addition, the company is actively cooperating with world-renowned technology companies in the R&D of humanoid robot magnetic components, with small batch deliveries, laying the foundation for subsequent large-scale mass production. In 2024, the company had sufficient orders on hand, with a capacity utilization rate of over 90%, and high-performance magnetic material finished product sales of about 20,900 mt, up 37.88% YoY.

8. What is the company's raw material supply and inventory situation?

JL MAG Rare-Earth responded: The company has built production plants in Ganzhou, Jiangxi, the main production area of heavy rare earths, and Baotou, Inner Mongolia, the main production area of light rare earths. The company has established long-term strategic cooperative relationships with major rare earth raw material suppliers, including China Northern Rare Earth Group and China Rare Earth Group. In 2024, the company's procurement amount from China Northern Rare Earth Group and China Rare Earth Group accounted for 63% of the company's total annual procurement. At the same time, the company adheres to the priority of green recycling of rare earths in procurement. By investing in the recycling rare earth company Bayannur Yinhai New Materials Co., Ltd., and after strict review by the globally authoritative recycling component certification agency SCS Global Service, the company's rare earth raw material supply is diversified, and its products are low-carbon. In 2024, the company used 2,575 mt of recycled rare earth raw materials (including recycled waste magnets), accounting for 30.4% of the total rare earth raw materials used in the year. Based on the company's values of "customer orientation and value co-creation," the company has always adhered to honest performance, ensuring client delivery. To this end, the company has established a sound rare earth raw material procurement mechanism to hedge risks. In the future, the company will closely monitor the price trend of rare earth raw materials and flexibly and prudently adjust inventory and procurement strategies.

The research report released by Guosen Securities on April 1 shows: Profitability declined with the industry, and the R&D expense ratio increased. The company's capacity and production steadily increased. In 2024, the company achieved NdFeB magnet blank production of 29,300 mt (+39.48%), finished product production of 21,600 mt (+42.40%), and finished product sales of 20,900 mt (+37.88%), setting a record high in the company's history. In 2024, the company's projects under construction were built and put into production as planned, with the actual capacity of magnetic material blanks reaching 32,000 mt for the year, and the capacity utilization rate exceeding 90%. By the end of 2024, the company had a magnetic material blank capacity of 38,000 mt/year. It is expected that in 2025, the company will build a capacity of 40,000 mt of high-performance rare earth permanent magnet materials and a humanoid robot magnetic component production line. As a top-tier enterprise in high-performance NdFeB permanent magnet materials, the company has strong profitability, high growth certainty, and global competitiveness, with advantages in management, technology, and customers, and is moving towards becoming a global leader in high-performance NdFeB permanent magnet materials, maintaining an "outperform the market" rating. Risk warning: Risk of significant fluctuations in rare earth raw material prices; risk of intensified industry competition.

Huafu Securities released a research report on March 31, giving JL MAG Rare-Earth a buy rating. The reasons for the rating mainly include: 1) In 2024, the company's magnetic material volume increased, prices fell, and profits declined; 2) The downstream NEV and variable frequency air conditioner markets grew significantly, and the company's market share increased; 3) Capacity construction is steadily advancing, and the company is laying out the humanoid robot and low-altitude aircraft fields. Risk warning: The company's projects under construction may not meet expectations; risk of raw material price fluctuations; downstream demand may not meet expectations; risk of intensified industry competition; risk of customer expansion not meeting expectations.

Reviewing the price trend of Pr-Nd alloy:

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Order to view SMM metal spot historical price trends

The price of Pr-Nd alloy fell in 2024. The average price of Pr-Nd alloy on December 31, 2024, was 489,000 yuan/mt, compared with the average price of 542,000 yuan/mt on December 29, 2023, a decrease of 53,000 yuan/mt, or 9.78%. The annual daily average price of Pr-Nd alloy in 2024 was 484,704.55 yuan/mt, compared with the annual daily average price of 645,330.58 yuan/mt in 2023, a decrease of 160,626.03 yuan/mt, or 24.89% YoY.

According to the latest SMM quotation, on April 1, the price of Pr-Nd alloy dropped to 540,000~543,000 yuan/mt, with an average price of 541,500 yuan/mt, down 0.28% from the previous trading day, and up 52,500 yuan/mt, or 10.74%, compared with the average price of 489,000 yuan/mt on December 31, 2024. The rare earth market was generally weak on April 1, with low activity in supplier quotations, and some suppliers still quoting high prices; however, from the perspective of downstream procurement, buyers' willingness to purchase at high prices was low, mostly making tentative inquiries, buying on dips. Overall, the rare earth market's trading volume was poor, and it is expected that the rare earth price will continue to be stable in the near future.