Key elements of the report: the company has become a large domestic private enterprise for molybdenum smelting and processing, under the background of the current unfavorable global economic situation and the depressed prosperity of the molybdenum industry, by increasing mine resources reserves and entering the field of high-end molybdenum metal products, enhance the company's profitability.
Investment points: Xinhua Dragon is a large private enterprise in the domestic molybdenum industry. Mainly engaged in molybdenum furnace charge, molybdenum chemical industry, molybdenum metal and other molybdenum series products production, processing, sales business. Guo Guanghua and Qin Lijing are the actual controllers of the company and together actually control 76.26% of the shares of the joint-stock company. The main production capacity includes 30300 tons / year roasted molybdenum concentrate, 15200 tons / year ferromolybdenum, 3000 tons / year ammonium molybdate, 3000 tons of high purity molybdenum oxide, and 3000 tons / year low-end molybdenum products.
The company adopts the order-to-order business model, molybdenum concentrate and roasted molybdenum concentrate raw materials account for more than 90% of the total production cost, through the purchase of molybdenum concentrate and other raw materials, processed into molybdenum series products to earn intermediate processing fees. The technical threshold of the industry is low, the competition is fierce, and the gross profit margin of smelting and processing is maintained at about 10%. Through the completion and commissioning of the technical transformation and molybdenum products deep processing project of Shuangshan Molybdenum and Copper Mine in Antu County, we can make up for the deficiency of large middle and small front and rear ends of the molybdenum industry chain and enhance the profitability of the company.
In the short and medium term, due to China's economic transformation, steel demand has entered a stage of low growth, while the European debt crisis has dragged down economic growth. It is expected that the current molybdenum industry will maintain an oversupply, molybdenum prices are difficult to have a rising trend, and the profitability of processing enterprises remains low.
It is estimated that the diluted earnings per share from 2012 to 2013 are 0.34 yuan and 0.36 yuan respectively. Considering that the company is a typical processing enterprise with few mine resources and low taste, the company is given a price-to-earnings ratio of 15-20 times according to the current market environment and comparable listed companies Jiangxi Copper and Nanshan Aluminium. The reasonable value range of the corresponding company is 5.1 yuan to 7.2 yuan.
Risk tips: molybdenum industry bidding further intensified, processing fees further reduced; mine taste is not as expected, mine profitability is not as expected, high-end molybdenum products process failed.
