Main points of investment
The company has high-quality zinc-iron polymetallic mines with obvious cost advantages. Dongshengmiao polymetallic pyrite owned by Dongshengmiao Mining Company is a large zinc-sulfur deposit with large pyrite ore reserves, ranking first in the northwest region; lead-zinc ore is of high grade, rich in reserves and easy to mine, and the cost advantage is obvious. At present, the mining scale of Dongshengmiao Mining has reached 1 million tons / year, and the net profit reached 332 million yuan in 2015. with the rise of metal prices in the future, profits are expected to reach a record high this year.
Jianxin Group has high-quality mine resources and strong expectation of asset injection. Jianxin Group has a large number of mine resources, in addition to lead and zinc mine resources, but also has tungsten, molybdenum, copper and other resources, the group has promised to inject into listed companies in the future to form a polymetallic industry chain. Once the debt crisis of Jianxin Group is resolved, the injection of assets may gradually approach.
Lead and zinc prices continue to rise, there is still room for upside in the future. The supply and demand pattern of zinc is the best among all kinds of metals, and the supply contraction is the most definite and reliable. At the same time, the possibility of Glencore's resumption of production is still low, and the domestic zinc mine has entered the winter break; on the demand side, the real estate start has recovered and the growth rate of automobile sales is high. Downstream zinc demand is expected to remain above 5%, and the demand exceeds market expectations. We believe that there is still room for zinc prices to rise in the future.
Maintain the company's "overweight" rating. We expect the company's net profit for 2016-2018 to be 3.22,4.59 and 529 million yuan respectively, and EPS 0.28,0.40 and 0.47 yuan respectively. Considering the continued recovery in lead and zinc prices, the company will fully benefit. At the same time, the group asset injection expectation is strong, and the company will be given a "overweight" rating.
Risk tips: lead and zinc price volatility risk; group debt risk; asset injection lower than expected risk.