The company's net profit to the parent increased 3.5% year over year in 2022. In 2022, the company achieved revenue of 55,339 billion yuan (+24.5%), net profit of 1,212 billion yuan (+3.5%), net profit of non-return mother of 1,173 million yuan (+10.91%), and net operating cash flow of 1,081 million yuan (-38.85%). Among them, the revenue for the single quarter of 2022/Q4 was 8.443 billion yuan (-31.7%), net profit of the mother was 167 million yuan (-8.3%), and net profit of the non-return mother was 171 million yuan (+18.2%).

The company's performance is mainly affected by fluctuations in zinc prices. The company's profits mainly come from its lead-zinc mines. The price of lead has fluctuated little, while the price of zinc has fluctuated greatly in recent years, which is the main factor in the company's profit changes. In terms of production and sales, the company produced 274,400 tons of lead-zinc concentrate in 2022, of which 181,700 tons in China, an increase of 5.15% over the same period last year; the amount of lead-zinc concentrate metal produced abroad was 92,300 tons. Completed production of the concentrate containing 153 kg of gold, the concentrate containing 4.53 tons of silver, and the concentrate containing 5,360 tons of copper.

Full entry into the copper industry chain. 2022 is the first year the company entered the copper industry. The company invested cash to acquire all shares of Dongying Fangyuan Copper Co., Ltd., etc. Dongying Fangyuan has 700,000 tons of copper smelting capacity, ranking 5th domestically, and private copper smelting enterprises ranked 1st. This reorganization of Fangyuan's enterprises marks the official entry of Zhongjin Lingnan into the copper industry chain. On the copper resource side, the company's debt conversion project, the Dominican Maimon Mine, will be completed and put into operation by the end of 2024. It is expected to produce a total of 60,000 tons of copper and zinc concentrates per year.

The ore metal variety has high value and resources, has the potential to become a world-class porphyry gold and copper ore, and is expected to be highly profitable in the future.

Risk warning: The progress of production capacity release is lower than expected, and there is a risk that the price of non-ferrous metals will fluctuate greatly.

Investment advice: First coverage to give an “increase in holdings” rating

Assuming that the price of zinc in 2023-2025 was 23,000 yuan/ton, the zinc concentrate processing fee was 5,500 yuan/ton, the copper price was 68,000 yuan/ton, and the processing fee for copper and copper concentrate was 88 US dollars/ton. The company's 2023/2024/2025 revenue was 784/844/964 billion yuan respectively, with a year-on-year growth rate of 41.6/7.7/ 14.3%, and Guimo's net profit was 1,413/14.86/2.08 billion yuan, the year-on-year growth rate of 16.5/5.2/48.5%, diluted EPS, respectively 0.38/0.40/0.59 yuan. The current stock price corresponding to PE is 12/11/9x, respectively. Through multi-faceted valuation, we believe that the company's stock value is 5.3-6.1 yuan, and the dynamic price-earnings ratio in 2023 is 14-16 times. Compared with the company's current stock price, there is room for about 8%-24%, corresponding to a total market value of 199—22.7 billion yuan. The company is a leading manufacturer of lead and zinc mining and metallurgy in China. It has high-quality mines such as the Fankou Lead-Zinc Mine. The total amount of discovered non-ferrous metal resources such as copper, zinc and lead is close to 10 million tons. The company has officially entered the copper industry chain through a merger and acquisition of the Dongying Fangyuan Copper Smelter. A supporting copper mine will be built next year, further opening up growth space and providing a “increase in holdings” rating for the first time.