Investment logic
The company announced plans to acquire the chairman's tantalum and niobium resources: the transaction assets are 100% controlled by the chairman of Central Africa Resources, its main assets are four 100 square kilometers of tantalum and niobium exploration rights of Hongqiao Mining in Madagascar.
Looking forward to the release of the first phase of the census report in the near future: central African Resources and the Guangdong Provincial material Experimental and testing Center signed the "Angela Bay Niobium-Tantalum-uranium Project Exploration Technical Service contract" and entrusted the latter to explore the four exploration rights. at present, the first phase of the census has been basically completed and the relevant report will be submitted in the near future.
Tantalum and niobium is a scarce strategic metal with high-end uses and high price: tantalum is widely used in national defense, aviation, aerospace, electronic computers, high-grade civil electrical appliances and electronic circuits of all kinds of electronic instruments. In the metallurgical industry, tantalum and niobium is mainly used as an additive in the production of high strength alloy steel, improving the properties of various alloys and making superhard tools. Tantalum ore Ta2O530%CIF domestic quotation is 1.65 million yuan / ton, niobium ore Nb2O550%min,Ta2O55%min quotation 260000 yuan / ton, the price is not cheap.
In October 2012, the shareholders' meeting of the company approved the fixed increase plan, which proposed to issue 50 million shares to the chairman of the board of directors. Last year, the shareholders' meeting of the company adopted the plan to issue an additional 50 million shares to the chairman of the board of directors, totaling 727 million. We expect the additional funds will be used for the working capital of titanium concentrate sales and the acquisition of tantalum and niobium ore.
Sales of titanium concentrate in 2012 are lower than expected, and we look forward to 13 years of restorative growth: according to the company's 11-year underwriting contract, the company has underwritten no less than 500000 tons a year from 12 years, and the company's quarterly report in 2012 shows that it has sold only 50, 000 tons, only 10% of the expected amount. We believe that there are still concerns in the market about whether the company's future titanium concentrate sales can meet expectations, and if the company's sales in the fourth quarter of 12 or the first quarter of 13 can reach the expected volume, it will dispel market concerns and stimulate the stock price.
Investment advice and valuation
Due to the uncertainty of the company's tantalum and niobium ore reserves and acquisitions, we only value the company's titanium concentrate sales business and existing hotel business. We estimate that the company's net profit from 2012 to 2014 will be 28 million yuan, 182 million yuan and 412 million yuan: the EPS in 2012 and 2014 will be 0.12,0.65 and 1.47 yuan respectively, corresponding to 118,24.75,10.91 times of PE from 2013 to 2014. We give the company an overweight rating taking into account the rapid growth in titanium concentrate sales and the expected injection of tantalum and niobium, as well as the lower-than-expected titanium concentrate sales and the political risk of the new Malagasy government taking office in May.
Risk
The risk that titanium concentrate sales continue to fall short of expectations, the risk of failure of this tantalum-niobium acquisition, and the risk of non-extension of exploration rights or failure to obtain mining rights caused by political risks in Madagascar.
