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. Could you briefly introduce the company's full-year performance in 2024?

JL MAG Rare-Earth responded: In 2024, guided by 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 management promptly adopted effective 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 sectors, 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 this, domestic sales revenue was 5.541 billion yuan, up 1.88% YoY; overseas sales revenue was 1.222 billion yuan, with sales revenue to the Americas of approximately 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 approximately 29,300 mt, up 39.48% YoY, and high-performance magnetic material finished product sales of approximately 20,900 mt, up 37.88% YoY, setting a record high in production and sales for the company. 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 sectors was as follows:

3. What is the current progress in 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 overseeing the strategic coordination of this unit. Currently, based on customer needs, the company has made comprehensive investments in dedicated factory buildings, equipment, and professional teams, initially possessing certain capabilities for mass production. In the future, the company will continue to increase R&D investment in the humanoid robot magnetic component field, actively promoting 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) 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 approximately 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, increased capacity, coordinated group advantage resources, and promoted the construction of projects such as JL MAG Ningbo Technology and Jin Cheng Rare-Earth, making extensive preparations for full production, leading to a phased increase in product unit costs and management expenses of the aforementioned subsidiaries, which had a certain impact on net profit. Among them, JL MAG Ningbo Technology's impact on consolidated net profit was approximately -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 in the humanoid robot magnetic component field, promoted production management informatization and automation, reduced costs and increased efficiency, and with some customers executing locked-price orders signed when rare earth raw material prices were at a relatively high level after Q3, the company's profitability gradually improved in Q3 and Q4.

6. Could you 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 for 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 leading customers in the NEV, variable frequency air conditioner, and wind power sectors, 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 mass production. In 2024, the company had sufficient orders on hand, with a capacity utilization rate exceeding 90%, and high-performance magnetic material finished product sales of approximately 20,900 mt, up 37.88% YoY.

8. Could you introduce 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 prioritizes green recycling of rare earths in its procurement. Through investment in the recycling rare earth company Bayannur Yin Hai New Material Co., Ltd., and after strict review by the globally authoritative recycling component certification body 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 for 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 comprehensive rare earth raw material procurement mechanism to hedge risks. In the future, the company will closely monitor rare earth raw material price trends and flexibly and prudently adjust inventory and procurement strategies.

A research report released by Guosen Securities on April 1 shows: Profitability declined with the industry, and 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 production and sales for the company. 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 capacity of 38,000 mt/year for magnetic material blanks. It is expected that in 2025, the company will build a capacity of 40,000 mt for 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, with its advantages in management, technology, and customers, has strong profitability, high growth certainty, and global competitiveness, 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.

A research report released by Huafu Securities on March 31 gave JL MAG Rare-Earth a buy rating. The reasons for the rating mainly include: 1) In 2024, the company's magnetic material volume increased while prices fell, leading to a decline in profits; 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, with layouts in humanoid robots and low-altitude aircraft. 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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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 to the average price of 542,000 yuan/mt on December 29, 2023, a decrease of 53,000 yuan/mt, or 9.78%. The annual average price of Pr-Nd alloy in 2024 was 484,704.55 yuan/mt, compared to the annual 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%, from the average price of 489,000 yuan/mt on December 31, 2024. The overall price of the rare earth market on April 1 was weak, 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 trading volume in the rare earth market was poor, and it is expected that the overall rare earth price will continue to stabilize in the near future.