Q3 performance is expected to increase by 131% over the same period last year.
On October 11, 2019, Jinling Mining (hereinafter referred to as "the company") issued a forecast of its three quarterly results in 2019, which is expected to achieve a net profit of 1.5-194 million yuan for shareholders of listed companies in the first three quarters of 2019, an increase of 103% over the same period last year. 19Q3 realized a net profit of 0.76-99 million yuan for shareholders of listed companies, an increase of 131% over the same period last year. In the forecast of the third quarterly report, we forecast that the company's Q3 profit was 64 million yuan, and the company's performance slightly exceeded our expectations. Based on the pace of resuming production of the four major mines and the judgment of future demand, we expect the company's EPS to be 0.29,0.37,0.45 yuan in 2019-2021, maintaining the "overweight" rating.
If the delivery is not as expected, the mine price will increase instead of falling.
The average price of 19Q3 iron ore (before tax) is 711 yuan / ton, with a month-on-month ratio of + 8%, which is contrary to our previous expectation of Q3 downside. It is mainly due to unexpected events such as port maintenance and production suspension that iron ore shipments fall short of expectations. According to Wind,19Q3, the total shipments of Brazil and Australia are only + 1% compared with the same period in previous years, which is lower than that of the same period in previous years. Among them, Rio Tinto PLC, BHP Group Ltd and FMG shipped to China by-0.5%,-4% and-16%, respectively, resulting in a larger decline in total Australian shipments compared with-7%, or higher shipments at the end of Q2. There are many disturbances every month. According to the month of Mysteel,7, Vale SA announced that some of the mining areas had stopped production ahead of time, resulting in Brazilian shipments of + 24% in August compared with the previous month. According to my iron and steel network, in September, Vale SA PMD port overhauled, and some of the Brucutu stalls were shut down due to excessive production, resulting in Brazilian shipments of-14.2% in September.
Q4 ore price may be under pressure, watch out for steel mills to replenish storage and boost ore price.
According to Vale SA's website, its target total sales of iron ore and pellets in 2019 is 307-332 million tons, which is officially expected to be the median, of which 2019H1 Vale SA iron ore sales is 117 million tons. According to Wind,Q3 Vale SA iron ore shipments of 74 million tons, taking into account the impact of pellets (official guidelines annual shipments of 43 million tons, of which H1 shipments of 21 million tons, assuming that Q3, Q4 each shipped 11 million tons), in order to achieve the target sales of the middle value, the lower limit of the target, Q4 Vale SA total shipments need to reach 0.96 tons, so the fourth quarter shipments or high, Q4 ore prices or pressure. In addition, according to the Mysteel,9 monthly steel plant imported sinter average inventory of 16.01 million tons, month-on-month, year-on-year respectively + 2.8%,-16.6%, still lower than the same period in previous years, if steel mills focus on replenishment, ore prices may suddenly rise.
We maintain the point of view of the medium-and long-term prosperity of iron ore for two years.
In the next 2 years, we are still bullish on the average price of iron ore, mainly because the iron ore energy is still in the contraction stage, while China, Southeast Asia and India have entered the long-process capacity expansion stage. We estimate that the increment of global iron ore demand / the four major mineral production increments in 2020 and 2021 will be 4600 and 470 million tons respectively, which will still have a price increase pattern in the medium and long term. We maintain the upward judgment of the average iron ore price from 2019 to 2021, and the average price is expected to rise by 150 yuan / ton this year compared with the same period last year.
The correction of mineral prices may lead to a decrease in profits and maintain the "overweight" rating.
Due to the 2019Q4 ore price or month-on-month pullback, we maintain the company's profit forecast. It is estimated that the company's BVPS in 2019-21 will be 4.31, 4.68, 5.13 yuan, corresponding to the previous share price PB 1.22, 1.12 pound 1.02 times, comparable company average PB (2019E) 1.80 times, considering that the company's iron ore reserves are far less than the four major mines, give the company 1.30-1.40 times PB in 2019, the target price is 5.60-6.03 yuan. Maintain the "overweight" rating.
Risk tips: the correction of mineral prices has increased; the demand has declined sharply; and the production and sales of the company's products have declined.
