In 2018, the operating income increased by 24.75%, and the net profit decreased by 53 million yuan compared with the same period last year. The company's operating income in 2018 was 8.358 billion yuan, an increase of 24.75% over the same period last year. The gross profit of sales was 474 million yuan, down 21.82% from the same period last year. The net profit was 53 million yuan, down 75.46% from the same period last year. Mainly due to the continued downturn in overall smelting and processing fees in 2018, although the company started an upward trend in the fourth quarter, the price of TC for raw materials did not benefit from the immediate change, resulting in a downturn in the first three quarters of full-year profits and a decline in net profit compared with the same period last year. The company continues to improve its operation level, and its expenses remain low during the period. The management expenses in 2018 are 247 million yuan, 5.66% lower than the same period last year. The sales expenses were 35 million yuan, down 5.29% from the same period last year. The company's total assets were 4.67 billion yuan, total liabilities were 2.241 billion yuan, owners' equity was 2.429 billion yuan, and asset-liability ratio was 47.99%. It continued to maintain a good balance sheet.
The winter storage price of the affected zinc mine is high, with a net profit of 23 million yuan in the first quarter, a slight increase compared with the previous quarter.
The company produced 75000 tons of smelting zinc in a single quarter, with a gross profit of 138 million yuan in the first quarter, an increase of 5.3% over the same period last year and 4.5% from the previous quarter. The return net profit was 23 million yuan, a decrease of 32.4% over the same period last year. In the first quarter of 2019, the prosperity of the zinc smelting industry has greatly increased, and the spot TC price has reached about 8100 yuan, with huge theoretical profits. As the company's smelting capacity is located in the north, it is inconvenient to transport raw materials when zinc mines are shut down in winter, so the smelting industry will reserve raw materials for the whole winter in October until the beginning of spring in the first quarter. The average TC price of zinc smelting in October 2018 was 6150 yuan per ton, only higher than the average price in the third quarter. The high price of winter reserves led to the lag in the realization of the company's profits, there was no significant increase in profits in a single quarter, and the gross profit only increased by 5 million yuan compared with the previous quarter. It is expected that after entering the second quarter, the purchase of smelting raw materials will return to normal, enterprises will enjoy the current boom in the industry, and the performance will be significantly improved.
It is estimated that the company's net profit in 2019 will be 519 million yuan, corresponding to EPS 0.35. Considering that the zinc smelting industry has entered a high economic cycle, the company will be given 15 times PE with a target price of 5.25 yuan.
Investment evaluation and suggestion
The company's zinc smelting capacity is stable and is expected to produce 300000 tons of zinc in 2019, with a utilization rate of 100%, benefiting directly from the rising TC market.
As a veteran zinc smelter, the company has been committed to developing zinc smelting business for many years. At this stage, there are no mining assets. 84% of revenue and gross profit come from purchased zinc concentrate smelting, and the performance elasticity is more obvious. Through the restructuring and mixed reform since 2013, the debt burden of the previous period has been solved with a debt settlement rate of 3.98%, and the financial cost has been reduced from 425 million yuan to 19 million yuan. In recent years, there is no investment in the development of large-scale production line equipment, depreciation expenses are stable, and management expenses remain low.
As overseas zinc mining projects are put into production and increase production, imported mines TC will further upstream, the company's factory area is close to the port, long-term high proportion use of imported mines, obvious location advantages. The recovery rate continues to rise, and higher than the industry average will receive a structural dividend. The company's performance will rebound significantly in 2019, and the smelting capacity will bring the company a gross profit of 1.121 billion yuan and a net profit of 519 million yuan.
We expect the company's revenue from 2019 to 2021 to be 8.39 billion yuan, 7.97 billion yuan and 7.75 billion yuan, respectively, an increase of 0.42%,-5.01% and-2.73% over the same period last year. The net profit returned to the mother was 519 million yuan, 491 million yuan and 253 million yuan, an increase of 878%,-5.5% and-48.2% respectively, and EPS per share was 0.37 yuan, 0.35 yuan and 0.18 yuan respectively. The net assets per share are 2.09 yuan, 2.44 yuan and 2.62 yuan respectively. From 2019 to 2020, the corresponding PE is 10.6,11.2 and 21.6 times, and the PB is 1.9,1.6 and 1.5 times, respectively. Taking into account the high zinc processing fees, the company's increased recovery rate and the advantage of using imported mines, the company was given a rating to increase its holdings, with a valuation of 15 times PE in 2019, with a 6-month target price of 5.25 yuan.
Risk analysis.
Zinc prices fell sharply in a short period of time, resulting in inventory price losses greatly affecting profits.
The actual purchase price of the company is different from the spot processing fee of the industry.