Matters: The company released its 2020 semi-annual report. During the reporting period, it achieved revenue of 16.446 billion yuan, an increase of 26.62%; net profit of the mother was 134 million yuan, a decrease of 8.51%; net profit after deducting non-return net profit of 30 million yuan, a year-on-year loss. Among them, in the Q2 quarter, revenue was 10.061 billion yuan, an increase of 41.06%; net profit of the mother was 44 million yuan, an increase of 19.13%; and net profit after deducting non-return mother was 259 million yuan, a record high since listing. Non-net profit reached a record high in the Q2 quarter. After Jiangtong joined the company in gross margin, the company's capacity utilization rate increased. In the first half of the year, it produced 24.83 tons of gold, an increase of 44.01%; 395.25 tons of silver, an increase of 49.17%; and 702,000 tons of electrolytic copper, an increase of 8.83%, which in turn led to a significant increase in product revenue, especially in the Q2 quarter. In terms of profit, in addition to rising gold prices, the company's non-net profit for the Q2 quarter reached 259 million yuan, a new high since listing. The gross profit margin was 5.68%, an increase of 1.82 pct, an increase of 4.36 pct, and the quality of operations continued to improve. The construction of the Liaoshang Gold Mine began, and increased post-production profit of 238 million yuan, with reserves of 75.53 tons and a grade of 3.71 grams per ton. The company plans to invest 1,232 billion yuan to build an ore project with an annual output of 900,000 tons/year. According to grade estimates, it is estimated that the production can produce 3.34 tons of gold per year. The company predicts an increase in revenue of 535 million yuan, profit of 238 million yuan, and a profit margin of 44.49%. It is conducive to increasing the company's self-sufficiency rate in gold resources and improving the economic efficiency of mining, and is expected to become a new economic growth point. The plan is to seek the acquisition of large-scale gold mines, and subsequent profits may increase the company's subsequent profits. The feedback response indicated that it is intended to reach an agreement of intent in the near future on the acquisition of controlling interests of two companies, Shuiwangzhuang Gold Mine and Lijiazhuang Gold Mine, and then begin corresponding preparations for the acquisition of controlling interests. If the acquisition is successful, the company's gold reserves will reach 347.45 tons, making it the fourth largest A-share gold listed company after Zijin, Shanhuang and CICC. More importantly, the market value ratio of the company's reserves is only 0.52, far lower than similar listed companies. After the acquisition is completed, it will enter the mine construction and mining process one after another. Assuming that the 30-year mining cycle of large-scale mines is estimated, the annual gold production after production may increase by another 6 tons after production. Assuming that net profit of 200 yuan/gram is estimated to increase net profit by more than 1.2 billion yuan, the company's profit is expected to increase significantly. The price of gold is still on an upward path. Since the outbreak of COVID-19, the world has rapidly introduced loose fiscal and monetary policies. Since March, the US fiscal deficit has widened significantly, and the federal funds rate has fallen sharply to close to 0. As major economies such as China and Europe resume production one after another, the manufacturing PMI of the world's major economies stopped falling and rebounded in May-June, and demand is gradually recovering. By 2021, due to the low base effect, the value of inflation is likely to be relatively high, driving the price of gold to continue to rise. Profit forecast and rating: Excluding acquisitions, net profit for 20-21 is estimated at 4.05, 5.50, and 760 million yuan. EPS is 0.44, 0.60, and 0.84 yuan/share, respectively, and PE is 45X, 33X, and 24X respectively. Compared with the average valuation of similar companies of 46X in 2020, the valuation is still at a low to medium level, and continues to be given a “buy” rating. Risk warning: the risk that the Liaoshang project will not progress as expected, the risk that the acquisition will fail; the risk that the fixed increase project will fall short of expectations