IPO purchase suggestions:
The company is a leading producer of silver in China, using comprehensive production processes to recycle and refine non-ferrous metals to increase economic value. According to CRU, the company ranked the tenth largest silver producer in China in terms of annual output in 2011. The company's main product is silver ingots with a purity of not less than 99.995%, which are sold under the well-known brand “Long Tianyong”, accounting for about 70% or more of the company's revenue. In 2011, the company's main products, silver ingots, lead ingots, bismuth ingots and antimony ingots, accounted for 73.1%, 13.9%, 7% and 4.1% of revenue respectively. In 2011, the company recorded revenue of HK$994 million, with a gross profit margin of 19.1%, down 8.7 percentage points from last year, mainly affected by falling silver and lead prices, with a net interest rate of 11.7%.
The company's main raw materials are slag, ore powder and anode mud, and uses its integrated production system for recycling, recycling and refining non-ferrous metals to produce silver ingots. The design annual production capacity of silver ingots is 250 tons, while the actual production of silver in 2011 was 112.9 tons, with a capacity utilization rate of 45.2%. The company believes that improving production efficiency is an important way to reduce the risks brought about by fluctuations in silver prices. By the end of October 2012, the capacity utilization rate had increased to 79.8. The company expects the annual production capacity of silver to reach 400 tons, 550 tons and 650 tons in 2013, 2014 and 2015 respectively. It plans to continuously shorten the production cycle (from ordering raw materials to terminal products) and improve production efficiency.
The company's largest customer is Minmetals Nonferrous Metals Co., Ltd., a state-owned enterprise with the largest market share in the Chinese non-ferrous metals market. Other major long-term customers of the company include China Nonferrous Metals Import and Export Jiangxi Co., Ltd. and Guilin Jinge Electrical & Electronic Materials Technology Co., Ltd. The company plans to further develop new customers, such as banks and financial institutions that actively trade silver in international and local commodity markets and have strong demand for silver ingots.
With expectations that the scale of quantitative easing in the US will continue to increase, precious metals prices are expected to rise next year, which will drive the price of the company's products. Furthermore, an increase in the company's production and sales rate in the future will also reduce the risk brought about by fluctuations in silver prices. The company plans to maintain a dividend level of 20%-30% in the future, and believes that the situation in the second half of this year is better than in the first half of the year. It is estimated that the profit for the full year of 2012 will be 150 million yuan, and the corresponding prospectus price PE is about 7 times. It is recommended to buy it.
