Main points of investment
Zhaojin Mining released its half-year results for 2021, with revenue of 3.487 billion yuan, an increase of 11.32 percent over the same period last year. The net profit was 95.44 million yuan, down 79.08% from the same period last year. The profit attributable to the owners of the parent company was 18.16 million yuan, down 95.60% from the same period last year.
Our comments are as follows: the performance has declined significantly, mainly due to the impact of production safety inspection and rectification in Shandong Province, resulting in a decline in the company's mineral gold output and an increase in the cost of gold.
Mineral gold production fell 32.3% to 5.33kg. The company's total gold output was 13.44 tons, down 11% from the same period last year. The output of mineral gold (self-produced gold + purchased gold and by-products) was 5.33 tons, down 32.3% from the same period last year, of which the output of self-produced gold was 4.25 tons, down 43% from the same period last year, and the output of smelting gold was 8.22 tons, up 12% from the same period last year.
The price of gold was flat, the output of mineral gold decreased, and the cost of gold increased. In the first half of the year, the production cost of self-produced gold was 243 yuan / g, an increase of 45% over the same period last year. During the period, the average gold price on domestic exchanges was 377 yuan / g, up 2% from the same period last year. The company's gross profit margin fell 10 percentage points to 34%, while gross profit fell 13% to 180 million yuan compared with the same period last year.
Administrative expenses and other expenses increased by 180 million yuan. It is mainly due to the loss of 160 million yuan in the change of fair value and the increase in R & D expenditure.
The proportion of profit and loss of minority shareholders has increased, because the profit and loss of minority shareholders are mainly in mines outside the port, which is not affected by the inspection and rectification of production safety in Shandong Province.
The gold mine in the sea area has obtained the mining license, and the mining cost in the sea area is low, the taste is high, and the reserves are large. It is expected that the output will begin to contribute at the end of 2022 and reach production by 2026. The output after the climbing period can reach 15 tons / year, and the comprehensive production cost is 120 yuan / g.
Our view.
We believe that gold prices will fall into an oscillatory downward phase during the Fed's expected management phase, similar to the one in which Bernanke began to convey a shift in monetary policy to the market in Q3 in 2011, and gold prices will have a rebound opportunity when the Taper hits the ground.
By the end of April, all the major mines of Zhaojin in the port had been approved to resume work. The company is guiding that the capacity utilization rate at the end of the year will be restored to 80% (currently 50%). The mineral gold production 12.31kg in 2021 corresponds to the 6.97kg of mineral gold production in the second half of the year, an increase of 31% compared with the first half of the year and a decrease of 43% over the same period last year. Under the current gold price (373yuan / g), we expect the company's 2021-2023E net profit to be 500 million yuan / 810 million yuan / 1.1 billion yuan respectively. The target price is HK $7.44, corresponding to a 25 × PE rating of 2022E, with a "buy" rating.
Risk tips: gold price fluctuation risk, mine production below expectations, safety accidents and environmental protection risks