JL Mag's Solid Preliminary Q3 Results Reinforce Our Positive View; HKD 36 FVE Maintained

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.