Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co, the nation's largest rare earth producer by output, reported Thursday a record 1,246.18 percent surge in net profit in 2010.

The Shanghai-listed company said in its annual report that revenue increased 102.8 percent last year to 5.26 billion yuan ($804.03 million), with net profits up 1,246.18 percent to 750 million yuan ($114.6 million).

The company attributed the results to rising prices of rare earth products driven by favorable government policies and increasing demand, as well as the successful expansion of its rare earth business in South China.

"The average prices of lanthanum oxide, cerium oxide and praseodymium neodymium oxide, major rare earth products of the company, have increased by 23.62 percent, 54.39 percent and 131.61 percent respectively in 2010, returning to the level before the financial crisis," said Liu Jinbo, an analyst at Xiangcai Securities.

The company also announced a plan to take a 100 percent stake in its subsidiary, Baotou Huamei Rare-earth Products Co, up from the 33.3 percent it had in 2003. The acquisition will bring a bigger export quota and boost the company in the North China rare earth industry, Liu said.

"There is great room for increase in rare earth downstream demand, benefiting from further development of new materials and new energies," said Yang Guoping, an analyst at China Jianyin Investment Securities.

However, in its report the company expressed anxiety about price fluctuations in 2011.

But Liu was less concerned. "Despite the tax imposed by China on rare earth minerals starting April 1 and the price hike of raw materials that may bring about increasing costs, the influence will probably be passed to the downstream industries and rare-earth product prices will continue to rise," he said.