JL MAG Rare-Earth

Phase A — Understand the business

Company Overview

JL MAG Rare-Earth (江西金力永磁) is the largest producer of high-performance sintered NdFeB permanent magnets in China and, on its own claim, the world. Founded 2008, headquartered in Ganzhou, Jiangxi — the heartland of China's ion-adsorption heavy rare earth deposits. It is a midstream converter, not a miner: it buys rare-earth metal/oxide feedstock (chiefly NdPr, plus heavy REs Dy/Tb) and turns it into finished magnets and magnet assemblies.

What it actually makes. Sintered NdFeB magnets across the full grade ladder, plus magnetic assemblies, injection-/compression-bonded magnets, motor rotors (a higher-value assembly step), and a nascent rare-earth recycling loop. The company controls the entire process in-house — alloy/strip casting, block ("blank") production, grain-boundary diffusion, machining, surface treatment — which lets it sell finished components rather than raw blocks.

End-markets (the demand stack). New-energy vehicle traction motors and auto parts; energy-saving variable-frequency air-conditioner (VFAC) compressors; direct-drive wind turbines; humanoid-robot and industrial-servo motors; 3C; elevators; rail transit. The 2024 mix (Lens 4) is roughly half NEV, a quarter VFAC, ~7% wind, ~21% other.

Marquee customers. Tesla (Model 3 RWD permanent-magnet motor — a public, order-based parts-purchase agreement signed Sept 2021), BYD, Toyota, Nidec, United Automotive Electronic Systems (UAES); supplies 8 of the top-10 vehicle A/C compressor makers and 5 of the top-10 wind-turbine OEMs. This is a genuine tier-1 customer franchise, not a marginal supplier.

Scale. FY2025 revenue RMB7,717.5mn (~US$1.07bn), +14.1% YoY, on 34,400 tonnes of magnetic material produced. Capacity ~40,000t in 2025, targeting 60,000t by 2027. Market capMarket capitalisationThe share price multiplied by the number of shares. What the market says the equity is worth. **~RMB47.4bn (~US$6.6bn) ** at RMB34.66 (8 May 2026).

The one-line model: a vertically-integrated magnet processor whose margin is the spread between volatile NdPr input cost and a price it largely passes through — wrapped in a Chinese-state resource and export-licence moat that no Western converter possesses.

Supply Chain

Map upstream → JL MAG → end-customer, with named stakeholders:

Upstream (feedstock).

• Light RE (NdPr) feedstock — sourced from the Chinese separation complex; the company references sourcing linked to China Southern Rare Earth / the consolidated China Rare Earth Group system. NdPr metal is the single largest cost line and the dominant swing variable in COGS.
• Heavy RE (Dy, Tb) — the chokepoint, and the moat. Through equity cooperation with Ganzhou Rare Earth Group (a holding company within the China Rare Earth Group "Six Groups", controlling almost all Jiangxi mining rights), JL MAG has secured heavy-rare-earth resource protection. Dy/Tb are precisely the elements China placed under export control in April 2025 — JL MAG sits inside that fence.
• Ganzhou Industrial Investment Holding Group appears among shareholders — a local-government ownership thread that reinforces resource access.

Midstream (JL MAG itself). Five production bases: Ganzhou (HQ), Baotou (Inner Mongolia — co-located with China's light-RE Bayan Obo complex), Ningbo (~15,000t line), plus a fifth plant in Mexico under construction (a near-shoring hedge for North-American auto customers). Grain-boundary diffusion (GBD) is the key in-house process step.

Downstream (buyers). Traction-motor and compressor tiers feeding Tesla, BYD, Toyota, Nidec, UAES; wind-turbine gearbox/generator OEMs (5 of top 10); A/C compressor makers (8 of top 10); and the emerging humanoid-robot actuator supply chain (Tesla Optimus-class programmes).

Chokepoints / single-source dependencies.

1. NdPr price — the company does not control its single largest input cost; margin is hostage to a Beijing-influenced commodity (Lens 5).
2. Heavy-RE (Dy/Tb) availability — mitigated for JL MAG specifically by the Ganzhou RE Group tie and by GBD (which slashes Dy/Tb intensity 70–100% ), but it is the binding constraint for the whole industry.
3. Export-licence regime — JL MAG's access to Western customers now runs through MOFCOM general licences (Lens 10). This is simultaneously its biggest moat (it has one) and its biggest single-point risk (Beijing can revoke or tighten it).

Names present, chokepoints marked — this lens passes.

Competitive Advantages (moats)

Four moats, in descending durability:

1. State-backed heavy-RE resource security (the deepest). The equity link to Ganzhou Rare Earth Group gives JL MAG protected access to Jiangxi heavy REs in a world where Dy/Tb are export-controlled and structurally scarce. No ex-China magnet maker — and even few Chinese peers — can replicate this. It is a political/structural moat, not merely industrial.

2. Sanctioned export channel (the most topical). JL MAG was in the first batch of three magnet makers — with San Huan (Zhongke Sanhuan) and Yunsheng (Ningbo Yunsheng) — granted MOFCOM "general licences" to ship controlled REs to pre-cleared customers under year-long, multi-shipment permits (Dec 2025); it had already received an early medium/heavy-RE export licence in June 2025. While most of the industry is throttled (yttrium/Dy/Tb exports ran ~50% below pre-restriction baseline ), JL MAG is a licensed gateway to Tesla/European OEMs. This is a powerful but revocable moat — its durability is a function of Beijing's posture.

3. Process / scale moat (genuine but commoditising). In-house grain-boundary diffusion lets JL MAG hit high-coercivity grades with 70–100% less Dy/Tb, cutting heavy-RE cost meaningfully. Combined with the largest sintered-NdFeB output base globally, this yields a cost and grade-breadth edge. Caveat: GBD was first developed in Japan and is now diffused across all the major Chinese houses — it is table-stakes among the top tier, not a proprietary secret.

4. Switching-cost / qualification moat (real, customer-specific). Magnets in a Tesla traction motor or a wind generator are designed-in and safety-/performance-qualified; re-qualifying a supplier is slow and costly. Once spec'd into a platform, JL MAG is sticky. But the Tesla agreement is explicitly order-based (Tesla "can adjust purchases according to actual needs") — so the lock-in is moderate, not contractual take-or-pay.

Bargaining power. Over customers: elevated right now by the export-licence scarcity (a licensed magnet is worth more than an unlicensed one). Over suppliers: weak — NdPr/Dy pricing is set by the upstream Chinese RE complex and the state, not by JL MAG. Net: the moat is real and currently widening, but it is largely granted by the Chinese state rather than owned by the company — which is the single most important thing to understand about this name.

Segments

our figures is empty (header-only); all figures /. JL MAG reports product-end-market splits, not clean EBIT-by-segment, so operating income per segment is n/a — not disclosed at segment level.

FY2024 revenue by end-market (total RMB6,763mn):

What moved and why. FY2024 revenue was flat (+1.1%) but net profit fell 48% to RMB291mn because NdPr prices collapsed and squeezed the processing spread — a vivid demonstration that this is a margin-on-feedstock business, not a unit-growth business, when prices fall. VFAC was the bright spot (+61.8%), reflecting China's energy-efficiency A/C mandates.

FY2025 inflection. Revenue RMB7,718mn (+14.1%), output 34,400t (+~17% vs 29.3kt blanks in 2024), and NP +142% to RMB705.6mn as NdPr stabilised then recovered and operating leverage kicked in. Net margin moved from ~4.3% (FY24) → ~9.1% (FY25) — the whole bull case is that this margin keeps climbing as NdPr rises and robot/EV volume scales; the whole bear case is that ~9% is what a price-taking processor earns at good times.

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Phase B — Measure performance

Earnings Result

Latest audited: FY2025 (released 25 Mar 2026):

• Revenue RMB7,717.5mn (~US$1.07bn ), +14.11% YoY.
• Net profit attributable RMB705.6mn, +142.44% YoY (off a depressed RMB291mn base).
• Output 34,400t of magnetic material; capacity ~40kt → ~86% utilisation.
• Dividend RMB2.2 per 10 shares proposed — a token but symbolically a payout, unusual for a "growth" RE name.
• Net margin ~9.1%; reported gross margin around 27%.

Quarterly cadence (the recovery arc):

• Q3 2025: NP +172.65% YoY.
• H1 2025: revenue RMB3.507bn; NP attributable RMB305mn, +154.81% YoY.
• Q1 2026: revenue RMB2.04bn (+16.05%); NP RMB192.8mn (+20.09%); NP ex-non-recurring +65.95%; EPS RMB0.14. The gap between +20% reported and +66% core signals non-recurring drag (likely inventory/FX/fair-value) masking stronger operating momentum.

vs consensus / guidance. FY2025 NP landed at RMB705.6mn vs guided RMB660–760mn — squarely in the range, top half. No clean Street EPS-vs-actual beat/miss is sourceable for an A-share name → n/a on consensus delta.

Balance-sheet / cash flags. Management explicitly cited delivering growth "despite a YoY decline in total NEV sales and sharp short-term NdPr volatility" — i.e. margin, not volume, did the work. The RMB300mn "small-scale fast-track" financing authorisation and the RMB1.05bn Baotou Phase-III spend signal heavy ongoing capex — watch FCFFree cash flowCash left after paying to run and maintain the business. Unlike profit, it is hard to flatter with accounting choices. and working capital (magnet inventory swings violently with NdPr). Hard cash-flow / net-debt figures: n/a (no filing on the shelf).

Unusual vs own history. The +142% NP rebound is real but base-effect-flattered — FY2024 was a trough. Normalised, FY2025 NP (RMB706mn) is only modestly above FY2022-era peak earnings — this is a cyclical recovery, not a step-change in earning power.

Earnings Calls (sentiment trend)

No transcripts on the shelf (transcripts=0); sentiment is inferred from public results commentary.

Recurring management themes across the 2025→Q1-26 prints:

• "Long-termism" / strategic capacity — the 60kt-by-2027 build is framed as multi-year conviction, not opportunistic.
• "Strict compliance, customer-centric execution" — code for we are a trusted, licence-holding exporter in a politicised market.
• Humanoid-robot rotors — escalating prominence: from "R&D / small-batch deliveries" (2024) to "initial mass-production capability" and "advanced robot motor-rotor projects" (2025–26). This is the deliberate narrative pivot from cyclical magnet maker to robotics-supply-chain compounder.

Tone shift. 2024 commentary was defensive (absorbing the NdPr crash, profit halved). Through 2025 it turned confident (record results, margin recovery, licence wins). The thing they stopped leaning on: pure NEV-volume growth (since NEV sales softened) — replaced by margin recovery + robots + export-gateway status. The risk: the robot story is doing a lot of valuation work for what is still <~5% of revenue.

Comps

Read. On every sourceable metric JL MAG is the premium-valued name in the group — ~46x trailing P/E and ~77x EV/EBITDA are growth-stock multiples on a commodity-processor P&L. Yantai Zhenghai (the nearest listed magnet peer with a sourced cap) is roughly a third of JL MAG's market cap on far thinner earnings. The Western miners trade on resource/strategic-premium narratives, not comparable earnings. Bottom line: the market already awards JL MAG a large premium for its scale + licence + robot optionality — there is little "cheap" here to discover. Where multiples aren't sourceable I have left n/a rather than fabricate.

Stock-Price Catalysts (moves >5%, last ~5y)

Pattern of what actually moves this stock:

1. Sept 2021 — Tesla parts agreement → +20% limit-up, closed +16.77% at RMB43.93. Single-customer marquee news is the most violent up-catalyst.
2. 2022–2024 — NdPr price collapse → multi-year de-rate, FY24 profit halved. Feedstock price is the dominant fundamental driver.
3. April 2025 — China heavy-RE export controls (Dy/Tb/Y) → rare-earth complex re-rated as strategic; magnet makers seen as scarcity beneficiaries.
4. June & Dec 2025 — JL MAG granted early export licence / first-batch MOFCOM general licence → confirmed as a sanctioned export gateway.
5. Aug 2025 onward — MP Materials stops shipping feedstock to China → NdPr +40% in weeks, +79.6% YoY by Jun 2026. The single biggest 2025–26 tailwind to the processing spread.
6. 2025–26 — humanoid-robot rotor news flow → repeated optionality pops.

What the tape reveals: this name trades on (a) NdPr price, (b) marquee-customer/export-licence headlines, and (c) the robot narrative — far more than on quarterly EPS. It is a policy-and-commodity beta with a robotics call option, not a steady-compounder. Macro/geopolitical headlines move it more than its own income statement.

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Phase C — Judge people & books

Management

Granular bios/comp are thin in English sources; flagged where unsourced.

1. Track record. The operating record is the strongest evidence: from a 2008 start to the largest sintered-NdFeB producer in China/globally, dual listings (Shenzhen 2018, HK 2022, ~US$650m raised), and capacity scaled from ~25kt to a 60kt-by-2027 plan with multi-base (Ganzhou/Baotou/Ningbo/Mexico) execution. That is real industrial build-out, delivered.
2. Tenure & skin in the game. Founder-led from Ganzhou; specific insider %/named controlling shareholder = n/a in English filings. Notable: state/quasi-state holders (Ganzhou Industrial Investment Holding Group; Ganzhou RE Group cooperation) sit in the ownership/resource structure — alignment is partly with the Chinese state's strategic agenda, not purely minority shareholders.
3. Capital allocation. Aggressively reinvestment-led — RMB1.05bn Baotou Phase III, Ningbo line, Mexico plant, RMB300mn fast-track financing authorisation. A maiden-style RMB2.2/10-share dividend signals some shareholder-return discipline. ROE swung with the cycle (depressed FY24, recovering FY25); precise ROE/ROIC series = n/a.
4. Red flags. No specific governance scandal surfaced. The structural flags are category ones: (i) state-linked ownership can subordinate minority interests to national policy; (ii) heavy related-party proximity to the China RE Group complex (feedstock supplier ≈ affiliated ecosystem) warrants scrutiny on transfer pricing — not sourced as abusive, but unverifiable from English disclosure; (iii) serial equity-raising dilutes (share count ~1.323bn (2025) → ~1.38bn (Jun 2026) ).
5. Archetype. Founder-operator inside a state-strategic industry. Implication: excellent at capacity and customer execution; but the company's fate is co-determined by Beijing's rare-earth policy — management optimises within constraints it does not set.

Forensic Red Flags

our figures empty; no filings on shelf. Forensics is necessarily directional and -based — this is a known limitation of analysing a PRC issuer with no EDGAR trail.

Accounting-risk surface (where to look hardest):

• Inventory / NdPr mark risk (highest). A magnet maker holds large RE inventories; when NdPr swings 40–80%, inventory valuation and gross margin gyrate and can flatter or punish a quarter. The Q1-26 split — NP +20% reported vs +66% ex-non-recurring — is direct evidence that non-operating items (plausibly inventory/fair-value/FX) materially move headline profit. This is the #1 number to interrogate in the actual annual report.
• Revenue recognition. Order-based (Tesla) + project (wind) revenue → timing/cut-off risk; not sourceable as problematic, but the lumpiness is real.
• Related-party feedstock. Proximity to Ganzhou RE Group / China Southern as both resource backstop and supplier raises transfer-pricing questions on input cost — flag, not finding (n/a from English disclosure).
• Capex / capitalisation. Heavy plant build-out invites scrutiny of what's capitalised vs expensed and depreciation policy as 60kt comes on — not sourced.
• Dilution. Steady share-count creep from raises.

Regulatory findings (required sub-section). Per regulatory/regulatory-findings.md (generated 2026-06-30): JL MAG has no CIK — no SEC EDGAR enforcement search is possible; total_sec_findings = 0.

• SEC (LR/AAER): none — not an SEC filer.
• Non-SEC web search ("JL Mag" (FTC OR DOJ OR FDA OR consent decree OR settlement OR fine OR penalty)): no material enforcement actions, fines, or consent decrees surfaced. The relevant "regulatory" reality is the inverse of enforcement — JL MAG is a beneficiary/licensee of China's MOFCOM export-control regime, not a target of it.
• 10-K Item 3 (Legal Proceedings): n/a — no 10-K exists (PRC issuer, no EDGAR).
• Net: No material regulatory or legal findings — verified via SEC EDGAR EFTS (LR, AAER; zero, not an SEC filer) and web search as of 2026-06-30. The dominant governance risk is not litigation — it is sovereign control: the company's export access, feedstock, and arguably its valuation are functions of Chinese state policy.

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Phase D — Project & stress-test

Forward Projection

Bottom-up off FY2025 actuals + FY2026 run-rate. No our model create in watchlist mode (per skill). Years are fiscal (Dec).

Anchors: FY2025 NP RMB705.6mn; Q1-26 NP RMB192.8mn (+20% reported, +66% core); shares ~1.38bn → EPS FY25 ≈ RMB0.51. Q1-26 EPS RMB0.14.

Swing variables: (1) NdPr price (sets spread); (2) volume ramp toward 60kt by 2027; (3) robot-rotor mix (margin-accretive if it scales); (4) operating leverage as utilisation rises; (5) dilution from ongoing raises.

Reality check on valuation. At ~RMB47bn cap, even the bull FY28 EPS ~RMB1.80 implies ~19x P/E three years out; the base ~RMB1.00 implies ~35x FY28. So the stock is discounting the bull volume+robot case landing in full. This is not a cheap stock on any honest forward path — the multiple is the bet. Base-case Brier forecast (not logged in watchlist): "300748.SZ FY27 net profit ≥ RMB1.15bn", p≈0.45.

Bull vs Bear

Bull case. JL MAG is the single best-positioned name to monetise the rare-earth weaponisation of the 2020s. It owns: the largest global sintered-NdFeB capacity; a state-protected heavy-RE feedstock backstop (Ganzhou RE Group); a sanctioned MOFCOM export licence that lets it sell to Tesla and European OEMs while rivals are throttled; and a call option on humanoid robots (~3.5kg NdFeB per robot × a market scaling to tens of thousands of units ). NdPr is in a structural up-cycle (Western supply detour, electrification demand > ex-China supply). FY2025's +142% NP shows the operating leverage when the spread turns. If robots inflect and NdPr stays high, earnings could ~3x by 2028 (bull). It is, functionally, the publicly-tradeable equity expression of "China controls the magnets."

Bear case (2–3 potentially-permanent impairments).

1. It is a price-taker, not a price-maker. ~9% net margin at a good point in the cycle, and FY2024 (NP −48% on flat revenue) proved the franchise cannot defend earnings when NdPr falls. The "moat" doesn't protect the margin. A reversion in NdPr alone caps the stock regardless of volume.
2. The biggest moat is granted, not owned — and revocable. The export-licence/resource edge is a function of Chinese state policy. A geopolitical thaw (general licences widened to all comers) erodes JL MAG's scarcity premium; a freeze (Beijing restricts even licensed flows, or redirects the franchise to a state champion) is an existential tail. Either way, minority shareholders sit downstream of a sovereign agenda.
3. Valuation prices the dream, not the P&L. ~46x trailing P/E and ~77x EV/EBITDA on a commodity processor leave no margin of safety; even the bull case is only ~19x FY28. The robot narrative — doing heavy valuation lifting at <~5% of revenue — is where disappointment would hurt most.

Pre-mortem (18 months out, thesis broke). NdPr round-tripped after the 2025 spike; China widened general licences so JL MAG's gateway premium evaporated; humanoid-robot volumes slipped right (Tesla Optimus redesigns/delays ) so the rotor segment stayed immaterial; margins drifted back toward mid-single digits; and the ~46x multiple compressed to ~20x — a 50%+ de-rate even with revenue still growing. The stock fell not because the business broke, but because the premium did.

Multiples too high? Yes, on any earnings-based view. The only frame in which they're defensible is "strategic-scarcity asset / robot-supply-chain pure-play," which is a narrative multiple.

Contrarian view (what the market refuses to see). Bulls treat the export licence as an unalloyed moat. The contrarian read: being the Chinese state's chosen export conduit is a double-edged sword — it makes JL MAG indispensable today but also a policy instrument, fully exposed to being throttled, taxed, or out-competed-by-decree the moment Beijing's incentives shift. The market is pricing the upside of state favour while underpricing the fragility of depending on it.

Devil's Advocate (short-seller)

Dismantling the bull case:

• Structural break in how it makes money: a sustained NdPr decline. The entire 2024 episode (revenue flat, profit halved) is the template — the company has no demonstrated ability to hold margin through the feedstock cycle. Short the spread, not the story.
• Revenue concentration: heavily NEV (~49%) + China energy-efficiency A/C (~23%). If Chinese NEV growth keeps decelerating (management already flagged declining NEV unit sales ) and the A/C subsidy cycle matures, the two pillars (~72% of revenue) soften together.
• Why the moat is weaker than bulls think: GBD is Japanese-origin and industry-wide among top Chinese houses — not proprietary. The export licence is shared with San Huan and Yunsheng (not exclusive) and is granted/revocable by MOFCOM. The resource tie is real but is the state's asset lent to the company.
• Most dangerous competitor bulls underestimate: the Chinese state itself / a consolidated national champion. Beijing could route the export franchise, feedstock priority, or robot-rotor mandate to a different entity. Externally, Zhongke Sanhuan (larger legacy magnet output) and a Western/allied supply chain (MP Materials + DoD, building domestic magnet capacity precisely to bypass JL MAG) erode the long-run scarcity premium.
• Worst capital-allocation / accounting concern: serial dilutive equity raises into a capex supercycle; opaque related-party feedstock economics with the China RE Group complex (transfer-pricing unverifiable from public disclosure); headline NP repeatedly diverging from core (Q1-26 +20% vs +66%) — forensically, the inventory/fair-value mark is doing real work in the printed number.
• Assumptions that must hold for today's price: NdPr stays elevated and 60kt volume lands and robots become a real segment and the export-licence premium persists. That is a conjunction of four bullish conditions — break any one and ~46x is indefensible.
• −20–30% growth shock: if NdPr/volume disappoint such that FY27 NP comes in ~RMB650mn (bear) instead of ~RMB1.15bn (base), the stock on an unchanged premium would be worth ~40–45% less; on a de-rated multiple, more.
• Single permanent-impairment scenario, plausibility: Western/allied magnet supply chains reach scale (MP Materials et al.) AND a US-China détente normalises export flows → JL MAG's two biggest moats (scarcity + sanctioned-gateway) both fade, leaving a ~9%-margin processor at a commodity multiple. Plausibility: moderate over 3–5y — it is the explicit policy goal of both Washington and Beijing's counterparties, and MP already stopped feeding China in Aug 2025.

Management Questions (ordered by information value)

1. Through-cycle margin: what gross/net margin can JL MAG defend if NdPr falls 30% from current levels — i.e., how much of the spread is genuinely passed through vs absorbed?
2. Export licence durability: what are the exact terms, duration, and renewal conditions of your MOFCOM general licence, and what happens to your Western-customer revenue if it is not renewed or is widened to all competitors?
3. Robot rotors — show me the number: current and FY2026/27 expected revenue and gross margin from humanoid-robot magnetic components, in RMB, not adjectives.
4. NdPr inventory: how large is your RE inventory position, what's the accounting policy, and how much of FY2025/Q1-26 net profit was inventory/fair-value mark rather than operating spread?
5. Related-party feedstock: how is input pricing set with Ganzhou RE Group / China Southern, and how do you assure minority holders the transfer pricing is arm's-length?
6. State alignment: how do you reconcile your obligations as a strategic exporter under Chinese policy with your fiduciary duty to minority (incl. HK/foreign) shareholders when the two diverge?
7. 60kt ramp economics: expected utilisation, incremental margin, and capex-to-completion for Baotou Phase III, Ningbo, and Mexico — and the FCF path through the build.
8. Customer concentration: revenue share of your top 5 customers, and the realistic re-order risk on the order-based Tesla agreement.
9. Mexico plant: is it a tariff/near-shoring hedge to keep Western auto volume, and does it operate on imported Chinese feedstock (and thus inside the export-control regime)?
10. Dilution policy: after the RMB300mn fast-track authorisation, what is the medium-term equity-issuance plan, and at what point do you fund growth from cash flow?
11. Recycling: what magnet volume will closed-loop RE recycling supply by 2027, and does it materially reduce feedstock-price exposure?
12. Competitive response: how do you defend share/margin against a scaled Western magnet supply chain (MP Materials + allies) explicitly built to bypass China?
13. GBD edge: is there any proprietary process advantage left in grain-boundary diffusion vs Zhongke Sanhuan / DMEGC, or is it now table-stakes?
14. Capital returns: is the RMB2.2/10-share dividend a one-off or the start of a policy, and how do you weigh buybacks given the elevated multiple?
15. The one fact: what is the single thing investors most misunderstand about JL MAG's earnings durability?

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