Why the current focus on Zhaojin Mining-triple "left" configuration encounter we think that Zhaojin Mining is currently located in the three-dimensional "left" configuration area, in which the explosive power of resonance will not be underestimated.

The first dimension is the "left" of Hong Kong stocks. The special structure of earnings plus valuation makes Hong Kong stocks significantly outperform A shares in the range between the downturn in China's economy and the rise in US interest rates. However, with a year of deep consolidation, double expectations are suppressed or are gradually fading, bottom repair can be expected; the second dimension is the "left" of gold stocks. With the volatility and weakness of gold prices for a year and a half, the valuations of gold stocks in Shanghai and Hong Kong have fallen to the lower edge of the historical range, and the feedback on the decline of gold prices has gradually passivated, and the risk of further withdrawal can be controlled; the third dimension is the "left" of gold recruitment. The established strong brigade set sail again, with both internal and external growth, with gold deposits in the sea as the core, and will usher in an explosive period in the next three to five years.

Why the veteran strong team is underestimated-the volume growth is stagnant, and the strategic conservative Zhaojin Mining Industry has always been the leader of China's comprehensive gold production and smelting, accounting for the geographical location of the gold capital, and is one of the four major gold groups.

Large-scale and pure business are the two characteristics of the company. The amount of gold resources of the company ranks second in the country, the annual output of mineral gold is nearly 20 tons, ranking fourth in the country, and the income ratio of gold mining business is as high as 90%. However, why it is significantly undervalued in the industry in recent years, and failed to repair the company's price-to-book ratio, market value / gold resources, market value / mineral gold output are all in the industry low. The market has been expecting it to fix the valuation, but it has not been achieved in the current cycle. We think that the core is the slightly conservative development strategy in the past. An in-depth review of the development of the company can be divided into three stages: "expansion-stagnation-restart": 1) the period of rapid expansion from 2006 to 2012. With the combination of endogenous injection and epitaxial acquisition, Zaozigou Gold Mine represents nearly 15 gold deposits, and the annual output of mineral gold has expanded from 8.4t to 18.1t. 2) the stagnation period from 2013 to 2019. Under the background of the periodic decline of gold price and superimposed management adjustment, the company's development strategy tends to be conservative, only completing a major acquisition of the sea gold mine, and the mineral gold level is maintained at about 20 tons. 3) set sail again from 2020 to the present. The company expanded and restarted, overseas mergers and acquisitions of Abuja gold mines, domestic sea gold mines were granted mining licenses, but the new project has not yet been put into production, superimposed Shandong mining disaster disturbance, the volume increase has not yet been realized. The share price marked the 2012 watershed in two stages, with CAGR gains of 22.8 per cent in the first half and-5.1 per cent in the second half.

Set sail again, what are the bright spots-internal and external mergers, quantity, quality and quality of the current backward outlook, Zhaojin Mining since 2020 strategic expansion accumulation is expected to accumulate abruptly, the two bright spots are worthy of attention.

Bright spot one, the sea area gold mine with high grade and large reserves has been put into production. It has four core advantages: 1) countercyclical acquisition with high performance-to-price ratio. The project is followed up for a long time, and the gold price is low. 2) when the mining license is issued, there is a strong certainty of putting into production in the future. The company obtained the gold mining license in the sea area in July 2021, the large-scale project is about to be built, and there is great certainty that it will be put into production in 2023. 3) superior geographical location and strong synergistic effect. The mine is close to Zhaoyuan City, which is conducive to giving full play to the synergy of the company's original infrastructure. 4) the grade is high and the reserves are large, and the increase in quantity is very considerable. It is expected to basically reach production in 2025, with an annual output of 16 tons, belonging to the company's rights and interests of about 10 tons. Bright spot two, overseas expansion signal, Abuja gold mine. 1) the starting point of overseas expansion. Invest in Abuja, transfer the company's "double H" strategy, and start overseas expansion. 2) the process of putting into production is fast. The Abuja gold mine is expected to start production in the fourth quarter of 2022 and reach production in 2023, with an annuity output of 8 tons.

Pay attention to the allocation opportunity of Zhaojin mining industry-- three days apart, when we are impressed by the triple resonance, it is suggested that we should pay attention to the performance-to-price ratio of Zhaojin mining industry. The company's current valuation is deeply undervalued, on the one hand, it is the feedback of the previous conservative business strategy, but also affected by the epidemic and the short-term impact of production safety in Shandong Province. With the future volume increase, the superimposed epidemic situation and the elimination of the impact of production safety improvement, there is a huge room for improvement in the company's valuation. The volume will strengthen in the next five years, and the performance will be released at an accelerated pace. The two major gold mines continue to sell, and it is expected to create another gold attraction. The company is expected to produce 40 tons of mineral gold in 2025, with a 5-year CAGR of 15%, a net profit of 2.1 billion yuan and a 5-year CAGR of 15%, corresponding to PE9X.

Risk hint

1. The international gold price has fallen sharply.

2. The company's production capacity is not as expected.