The performance in 2019 is expected to grow by 69% compared with the same period last year.
On January 21, Jinling Mining (hereinafter referred to as "the Company") issued a performance forecast for 2019, which is expected to achieve a net profit of 170-205 million yuan for shareholders belonging to listed companies in 2019, an increase of 69% over the same period last year. 19Q4 realized net profit attributable to shareholders of listed companies-0.04 billion yuan, with a year-on-year change of-115% 16%. We previously predicted that the company would make a profit of 2.04 yuan and 30 million yuan, respectively, and the company's performance was in line with our expectations. Based on the production pace of the four major mines and the judgment of future demand, we expect the company's EPS to be 0.34,0.37,0.40 yuan in 2019-21, maintaining the "overweight" rating.
19Q4 ore price is-16% month-on-month, or because iron ore consumption dropped by more than supply in 2019, the average price of iron ore Australian PB powder (excluding tax) is 627 yuan / ton (YoY+176 yuan / ton, + 39%), of which the average price of 19Q4 is 597 yuan / ton (YoY+104 yuan / ton, + 21% QoQrel 115 yuan / ton,-16%). 19Q4 ore prices declined significantly month-on-month, mainly because iron ore consumption fell more than supply, 19Q4 China pig iron production-0.05%, global crude steel production-4%; over the same period, total iron ore shipments in Brazil and Australia were-0.8%. According to Wind,19Q4, the total shipments of Brazil and Australia are 0.81 and 203 million tons respectively, with a month-on-month ratio of-7% and + 2%, respectively. In early December 2019, Vale announced the suspension of production of the Laranjeiras tailings dam for safety inspection, which may last for 1-2 months, affecting monthly production of 1.5 million tons and Q4 Brazilian iron ore shipments.
Iron ore production is still in a period of capacity contraction, 2020 production increment or limited in the previous iron ore depth report "supply inflection point approaching, bargaining power or upward" (2019.2.10), we mentioned that the four major mine capital expenditure peaks are 3-5 years ahead of the production increment peak, judging that the global iron ore industry is in a period of capacity contraction. After the 2019 mine disaster, Vale continuously revised its target sales volume for 2019, and local government safety audits further increased the risk of shutdown of resumption capacity, Vale resumption or uncertainty, iron ore production growth is limited. We expect Vale shipments in 2020 to be less than the annual guidelines, BHP, FMG and Rio shipments to remain or slightly lower than last year's levels, while there is still uncertainty over the renewal of mining rights in India and the resumption of iron ore production in Goa State, or further reduce global iron ore supply.
Iron ore demand may continue to be strong, bullish on ore prices in 2020
We believe that from the December 2019 data, the macro-economy may continue to recover-new real estate construction area compared with the previous value + 4.5pct, real estate investment is relatively resilient; manufacturing investment is compared with the previous value + 6.9pct. The economy shows a moderate recovery, or boost steel demand, superimposed iron ore is still in the cycle of capacity contraction, we expect mineral prices to rise in 2020. In addition, the port iron ore inventory is at a nearly two-year low, which is expected to further support ore prices. Last week, total iron ore stocks at port 45 were 124 million tons,-14% year-on-year, still below the inventory level of the past two years, according to Wind.
The company may benefit from rising mineral prices and maintain its "overweight" rating.
We believe that the iron ore is still in the production capacity contraction cycle, and the downstream demand is not weak, and the ore price may be upward. it is estimated that the company's BVPS in 2019-21 will be 4.37pm 4.74max 5.14 yuan, corresponding to PB 1.57max 1.44pm 1.33times, comparable company PB (2020E) average 2.04times, considering that the company's iron ore reserves are far less than those of the four major mines, the company will be given 1.601.70x PB in 2020, with a target price of 7.598.06RMB. Maintain the "overweight" rating.
Risk hint: Vale SA's resumption of production exceeded expectations; macroeconomic recovery was lower than expected.