Investment suggestions: As the largest lead-zinc smelter in Northeast China, the company is also a large-scale lead-zinc smelter under China Metallurgical Science and Industry Co., Ltd. Its unique geographical advantages and shareholder advantages lay the foundation for the company's future development. In the future, the company will focus on expanding mineral resources, improving technical equipment, and strengthening internal management, so as to achieve a rapid increase in the company's profitability. We believe that the core of the company's future investment value is the expansion of the company's resources. We initially predict that the company's earnings per share in 2009-11 will be 0.05 yuan, 0.15 yuan, and 0.18 yuan. Based on the company's development direction, we gave the company an “increase in holdings” rating for the first time, and the company's investment value will also depend on future resource acquisitions or injections.

As far as northeast China is concerned,

ST Zinc is the only large-scale lead-zinc smelter that still exists. It is also currently the only lead-zinc smelter in the northern region located in a coastal area. Its unique geographical advantages will benefit the company's development, and its majority shareholder, China Metallurgical Science & Industry Co., Ltd. has rich mineral resources and strong resource expansion capabilities, which also provides a good foundation for the company's future development, and its development prospects are also worth looking forward to.

1. The wharf currently under construction in Huludao is specifically for this.

ST Zinc has reserved a berth to facilitate the import of raw materials by enterprises in the future. The company plans to build a conveyor belt for raw materials from the terminal to the company in the future, which will greatly reduce the transportation cost of raw materials. However, the company is only 35 kilometers from Jinzhou Port, and it is relatively convenient to transport raw materials by waterway, making full use of both domestic and foreign resources.

This geographical advantage is not currently available to other domestic lead-zinc smelting enterprises. Apart from the fact that Zhongjin Lingnan is close to the port, all other lead-zinc smelters are located in inland regions, outsourced resources are transported by land, and logistics costs are high. We believe that the company has a good geographical advantage and can make full use of both domestic and foreign resources. From the perspective of “innate conditions”, the company is not at a disadvantage compared to other lead and zinc smelting enterprises.

2. The company leaned on big trees to enjoy the cool weather. The controlling shareholder is China Metallurgical Huludao Nonferrous Metals Group Co., Ltd., which accounts for 38.17% of the total share capital, while Metallurgical Huludao Nonferrous Metals Group Co., Ltd. is held by China Metallurgical Science & Industry Co., Ltd., China Huarong Asset Management Company, China Great Wall Asset Management Company, and China Construction Bank Co., Ltd. It can be said that the company's shareholder units are all “big trees”, a national brand. In particular, China Metallurgical Science & Engineering Co., Ltd., which mainly produces and operates, will dominate the future fate of the company.

Judging from the holding ratio of China Metallurgical Science and Industry Co., Ltd., it is a relative holding, but since the Huludao Zinc Plant is a production enterprise, all other enterprises are asset management companies, so the actual operation is mainly managed by China Metallurgical Science and Industry Co., Ltd. The direct shareholder of Zhongye Huludao Nonferrous Metals Group Co., Ltd. is also owned by Huludao Oriental Copper Co., Ltd., which produces 100,000 tons of refined copper per year, as well as China Metallurgical Huludao Nonferrous Metallurgy Import & Export Co., Ltd. and Huludao Nonferrous Metallurgy Design Institute Co., Ltd.

3. The company has a production scale of 390,000 tons of zinc, a production capacity of 30,000 tons of lead, and a total annual production capacity of 700,000 tons of sulfuric acid. It is a large-scale lead-zinc smelting enterprise. However, due to the company's poor equipment technology, management, etc., production has not been fully achieved. In 2008, when global metal prices plummeted, lead and zinc production declined further, and the company continued to lose money.

We believe that there is still a certain gap between the company's current production equipment and technology and that gradual improvements are needed. In particular, the company's precious metals recycling rate is too low, which limits the improvement of the company's profitability. Currently, the company is carrying out extensive technological reforms, especially the recycling technology for rare precious metals, which will significantly increase the recovery rate of rare and precious metals and enhance the company's profitability.

4. China Metallurgical Science & Industry Co., Ltd. is rich in copper, lead, and zinc resources, and is expected to carry out resource restructuring again in the future, thus making

ST Zinc has achieved an integrated resource-smelting production enterprise, while China Metallurgical Science & Industry Co., Ltd. has also achieved absolute control by directly controlling ST Zinc. We believe that although China Metallurgical Science & Industry Co., Ltd. has now been successfully listed, due to its abundant resources, it is not ruled out that the company's internal resource restructuring will at least help ST Zinc expand its resources, thus completely changing it.

ST Zinc has a history of no mineral resources.

From the viewpoint of the feasibility of domestic and foreign mineral resource development, domestic lead and zinc resources are expected to be injected in the future.

ST Zinc, and since China Metallurgical Huludao Nonferrous Metals Group Co., Ltd. also has 100,000 tons of crude copper smelting capacity, it is possible that it will be injected in the future.

ST Zinc has made the company a comprehensive smelting enterprise integrating copper, lead, and zinc, and foreign copper resources owned by the majority shareholders are also expected to meet their production needs or be injected, but we think it is difficult to determine the injection method in the short term. We think it's whether it's an injection of resources or help.

ST Zinc's search for high-quality copper, lead, and zinc resources all depends on how China Metallurgical Science & Industry Co., Ltd. views it.

ST Zinc is a smelting platform, if it is support.

As for the development of ST Zinc industry, the future direction of development is to acquire resources, either by injecting them or by acquiring them from abroad.

Judging from our understanding of the company and our own analysis, in the next few years, in addition to improving the level of management and technology, the company's first task will definitely be to acquire resources, step up efforts and speed up the pace to implement “forward integration.” And this is a necessary condition for us to be optimistic about the future development of the company.

5. The company's profit forecast

Since the company currently only has smelting production capacity, there will be no significant increase in profitability. Compared with forecasting the company's future performance, we pay more attention to the company's future resource acquisition and injection. Based on the company's role as a copper, lead, and zinc smelter under China Metallurgical Science and Industry Co., Ltd., we believe that during the “12th Five-Year Plan” period, the company will focus on developing mining resources significantly, thereby seeking a significant increase in profitability. Without considering the company's resource injection, we initially predicted that the company's earnings per share in 2009-11 would be 0.05 yuan, 0.15 yuan, and 0.18 yuan. Based on the company's development direction, we gave the company an “increase in holdings” rating for the first time, and the company's investment value will also be determined based on future resource acquisitions or injections.

6. Factors of uncertainty.

Systemic risk; there is great uncertainty about the future injection of the company's mineral resources.