Event: Jianxin Mining released its three-quarter report, with operating income of 780 million yuan in the first three quarters, an increase of 32.7% over the same period last year; net profit belonging to the owner of the parent company was 150 million yuan, up 29.3% over the same period last year; basic earnings per share was 0.13 yuan, an increase of 29.4% over the same period last year, of which operating income in the third quarter was 300 million yuan, an increase of 57.0% over the same period last year The net profit belonging to the owner of the parent company was 90.809 million yuan, an increase of 301.7% over the same period last year, and basic earnings per share was 0.08 yuan, an increase of 301.5% over the same period last year.
The results in the first three quarters were in line with expectations, and the growth mainly depended on zinc. The core asset of Jianxin Mining is Dongshengmiao Mine, which mainly produces zinc, and its mining and dressing capacity has reached 1.8 million tons per year. Every year, the main profit source of Jianxin Mining comes from this mine, so the company's performance is closely related to the price of zinc. In addition, historically, the performance of Jianxin Mining has been very seasonal, mainly due to the geographical limitations of the company, the fourth quarter tends to be the highest performance.
Zinc prices rose in line with expectations. Zinc prices have been rising since the beginning of the year. The average monthly price has risen from 13000 yuan to 19000 yuan. Since the beginning of the year, the average price has reached 16000 yuan, which is 5.8% higher than the average price last year. Zinc price has been around 18000 yuan for three months, which will further raise the annual average price, especially the average price in the fourth quarter, which will significantly contribute to the performance and increase the certainty of the performance.
Zinc price sensitivity is high. We have calculated the sensitivity of the performance of several major lead-zinc mining companies on the A stock market to zinc prices. under our model, for every 500 yuan increase or decrease in zinc price for the whole year, the performance of Jianxin Mining will increase or decrease by 4.6%. Sensitivity ranks high among these companies.
Profit forecast and investment advice. After we appropriately raise the forecast of zinc price for the whole year, it is estimated that the EPS in 2016-2018 will be 0.28,0.33,0.36 yuan respectively, corresponding to 33 times, 28 times and 26 times PE respectively, with a "buy" rating.
Risk hints: zinc price changes or exceed expectations, zinc mining capacity or exceed expectations and other risks.