Gold Mining announced its results for the first half of 2022: revenue of 3.54 billion yuan, year-on-year + 1.4%; gross profit of 1.33 billion yuan, up 13.0% over the same period last year; and net profit of 110 million yuan, up 493.4% over the same period last year.
Comments: the floating loss of financial assets measured at fair value is 215 million yuan, which is mainly caused by the decline in the market value of gold strategic investment stocks in the secondary market, and the return net profit is about 320 million yuan, in line with expectations.
The output of self-produced gold exceeds the plan to complete the task, and the unit cost of gold is well controlled. In the first half of the year, mineral gold increased by 62.2% to 8.7 tons compared with the same period last year, an increase of 18.6% over the previous year, and the progress of self-produced gold production exceeded the annual plan by 50%. Smelting gold output was 4.9 tons, down 40.8% from the same period last year. The comprehensive cost of gold is controlled at 194 yuan / g, which is lower than the target at the beginning of the year (200 yuan / g).
In the first half of the year, the conflict between Russia and Ukraine and the inflation and interest rate hikes in the United States were repeatedly disturbed, and the international gold price rose by an average of 3.9% compared with the same period last year.
Administrative expenses and other expenses are on the high side, mainly due to increased investment in research and development. In the first half of the year, the company invested 58 million yuan in scientific and technological innovation and 143 million yuan in technological renovation projects. The company is also focusing on the four modernizations project to improve the intelligent level of mines and successfully create the first industrial-level data management platform with credible content and controllable process in the gold mining industry to promote efficiency.
The gold project in the sea area is progressing smoothly, the design of safety facilities has passed the review, and the safety three has recently been formally approved. The project is about to be fully built, and 2025 Universe will contribute large-scale profits in 2026.
Our point of view: the company will enter the construction year of the sea area project in 2022, and the output of the company will double in the next 5 years with high certainty. The gold mine in the sea area has successfully obtained the mining certificate, completed the approval of environmental assessment, and the design of safety facilities has also been reviewed and approved. the mine has the advantages of "large reserves and low cost". Large-scale infrastructure work began in 2022, mineral processing and production were carried out in turn. The output is expected to reach 16 tons per year in 2025, which is twice as much as the company's gold production. Under the assumption that the gold price is stable, the company's net profit from 2022 to 2026 is CAGR=29.0%.
It is recommended to configure gold. With reference to the previous Fed "contraction table" or "interest rate hike" law, the "dovish" signal during the tightening period of monetary policy can give gold a chance to rebound by 15-30%. At the FOMC meeting in July, the Fed acknowledged that there was recession pressure on the economy, "relaxed" for the first time that the pace of future interest rate hikes slowed, and abandoned its forward guidance to send a "dove" signal. The minutes of Thursday's Fed meeting acknowledged for the first time the risk of "excessive interest rate hikes".
At present, the company is still in a state of undervaluation, and the enterprise value / resource of EV is only 1 / 3 of that of its peers. The rebound in gold price and the release of gold deposits in the sea area will be the catalyst for valuation repair. We expect the company's net return profit for 22-23-24 to be 4.3, 6.6, and 1.07 billion yuan, respectively, compared with + 1179.1%, 53.2, and 62.1 percent, respectively. The target price is HK $9.4, maintaining the "buy" rating.
Risk tips: gold price fluctuation risk, mine production below expectations, safety accidents and environmental protection risks