The company publishes its annual report for 2017. During the reporting period, the company realized revenue of 6.056 billion yuan, an increase of 136.57% over the same period last year, and realized a net profit of 301 million yuan, a year-on-year increase of 484.99%. The performance growth is mainly due to the increase in the price of copper cathode and the increase in gross profit margin of Pengxin Mining Co., Ltd.
The rising copper price led to the continuous growth of the company's cathode copper business performance. As LME copper prices rose from about $4700 / ton at the end of 2015 to about $7200 / ton at the end of 2017, the company's performance grew rapidly due to the rise in copper prices; at the same time, the company completed the acquisition of a minority stake (49.82%) in Pengxin Mine at the end of 2016. as a result, the proportion of interest in Xitulu Copper Mine, the main production entity of cathode copper, has increased and the profit space has expanded. In 2017, the company produced a total of 33920.27 tons of cathode copper, sales of 36339.84 tons, sales growth of 8.98%, cathode copper products volume and price rise led to a substantial increase in the company's performance.
Since the beginning of 2018, LME copper prices have hovered around 7000 US dollars per ton. We believe that the copper industry will enter a 2-3-year economic cycle, the industry supply and demand will change from surplus to shortage and the gap will gradually expand, the copper price center will continue to move up, and under the background of rising copper prices, the company's performance is expected to continue.
The expansion of production capacity is advancing steadily, and the business of copper, cobalt and gold is developing together. At present, the company has a production capacity of 40,000 tons of cathode copper in Xitulu Mining, and a project of 20,000 tons of cathode copper and 7000 tons of cobalt is under construction. when all is completed, the company will have a production capacity of 62700 tons of cathode copper and 8174 tons of cobalt. During the reporting period, the company's cobalt hydroxide phase I (3000 metal tons / year) production line project and cobalt ore trading center have begun construction, and the production capacity is expected to be completed and put into production by the end of 2018.
At the same time, the company acquired the Oni Gold Mine in South Africa in 2017 and actively promoted the resumption of production in the mine. After reaching production, the production scale of the mine is expected to reach 6000t/d, and the production capacity will gradually recover in the next six years, when the four mining areas will reach an annual production capacity of 1.98 million tons of ore and 95% of 11.74 tons of synthetic gold. The work of mine recovery in 2018 will be further implemented.
Actively distribute cobalt and nickel and enjoy the dividends of the new energy industry. In the Democratic Republic of the Congo (DRC), the company locked the raw materials of high quality and cheap cobalt ore upstream by reaching strategic partners and signing underwriting agreements with Gerrard and Zhongse Dike and establishing cobalt trading centers in the upstream, and signed a 5-year underwriting agreement with Gepai New Energy downstream to lock in 30% of cobalt hydroxide production. In Australia, Clean TeQ acquired the highest quality Syerston nickel-cobalt mine outside Africa and used its key technology to produce battery-grade cobalt sulfate and nickel sulfate at low cost from laterite nickel ore, and downstream signed a five-year underwriting agreement with Dangsheng Technology, locking in about 20 per cent of cobalt sulfate and nickel sulfate production. Syerston Nickel-Cobalt Mine will build a project with an average annual output of 18700 tons of nickel, 3222 tons of cobalt and 49.2 tons of scandium. After reaching production, it is expected to confirm an annual investment income of 248 million yuan.
Profit forecast and investment advice: we estimate that the company's net profit from 2018 to 2020 is 551 million yuan, 737 million yuan and 773 million yuan respectively (the model is slightly adjusted according to the project schedule of the company), and the EPS is 0.29,0.39 and 0.41 yuan per share respectively (if the fixed increase is successfully completed, the EPS is expected to be 0.26,0.35,0.37 yuan per share respectively). The corresponding current price PE is 35 times, 26 times and 25 times respectively. Considering that the company's new production capacity will greatly increase the company's performance, while the original capacity will remain stable in the next five years, the company's performance is expected to maintain the company's "buy" rating in the context of high copper prices.
Risk hint: prices of metals such as copper and cobalt fall; production capacity is lower than expected