Event
On August 18, the company released its 2016 semi-annual report. During the reporting period, the company achieved operating income of 487.9191 million yuan, an increase of 21.41% over the same period last year. The net profit belonging to shareholders of listed companies was 61.3069 million yuan, down 35.49% from the same period last year.
Comments:
The average price of the product is lower than that of the same period and the influence of the decline of grade. In the first half of 2016, the company's original mine mining volume was 1.25 million tons, an increase of 54% over the same period last year. However, the mining grade of zinc / lead / copper decreased by 0.46%, 0.13%, 0.21%, respectively, resulting in an increase in unit cost. At the same time, the average sales price of per ton zinc / lead / copper concentrate decreased by 1191 yuan / 874 yuan / 7506 yuan compared with the same period last year. The combination of the two factors led to a sharp decline in the company's gross profit margin, increasing production but not increasing profits.
Pure zinc lead ore target, lead-free zinc smelting assets. The company has Dongshengmiao zinc pyrite, Zhongjiashan lead-zinc and Dawangfu lead-zinc mine and other three mines, Jiangshan lead-zinc mine exploration rights. Among them, the iron / zinc / lead / copper metal reserves of Dongshengmiao are 21.99 million tons / 2.14 million tons / 260000 tons / 390000 tons respectively, the average grade is 21.23% 3.71% shock 0.91% pound 1.1%, and the raw ore mining capacity is 2.2 million tons / year. It is the company's most profitable and high-quality core asset. The output of 2015A iron / zinc / lead / copper concentrate is 92000 tons / 85400 tons / 14700 tons / 2200 tons respectively, and the output of zinc concentrate ranks among the top 10 in the country. The company's lead-free zinc smelting assets enjoy the rise in lead and zinc prices and the decline in lead and zinc processing fees.
A large number of mines that have been built and put into production are waiting to be injected into large-scale comprehensive miners. Jianxin Group, the major shareholder of the company, still has a lot of mineral resources, and plans to inject into Inner Mongolia Zhongxi Mining (Dasuji Molybdenum Mine) by 2016, and mine resources such as 40% equity in Xinzhou Mining (Xiaoliugou Tungsten and Molybdenum Mine), Obrage Copper Mine, West Jinde Chengxin (Houyu Molybdenum Polymetallic Mine, Fanzhi County) by 2017. Ruifeng lead smelting and Huafeng zinc oxide smelting companies will be injected into listed companies within one year after the industry recovers and makes profits for two years in a row.
The company will become a major shareholder resource platform and is expected to grow into a large domestic comprehensive miner in the future.
Zinc prices remain high in the second half of the year and have great potential for performance growth. We predict that the average price of zinc will remain above 17500 yuan / ton in the second half of the year, and the average price of zinc for the whole year will be 16078 yuan / ton, which is higher than that of the same period last year. The company's zinc concentrate output will reach 86400 tons. The company did not hedge the futures and enjoyed the rising price dividend.
Profit forecast and valuation: target price 11 yuan per share, investment rating "buy"
Based on the above assumptions, we predict that the operating income of the company's 2016A/2017A/2018A is 1.263 billion yuan / 1.429 billion yuan / 1.447 billion yuan respectively, the net profit belonging to the owner of the parent company is 320 million yuan / 451 million yuan / 465 million yuan, and the corresponding EPS is 0.28 yuan / 0.40 yuan / 0.41 yuan respectively. The PE that can be given to the company's 2016A/2017A/2018A is 39 times / 28 times / 27 times respectively. Corresponding to the valuation level of 39 times PE in 2016, the target price is 11 yuan per share, with an investment rating of "buy".
Risk hint
The price of zinc concentrate is lower than expected, the decline of ore grade is higher than expected, and the output is not as expected.