According to the semi-annual report for 2020, the operating income in the first half of the year was 16.4 billion yuan, an increase of 26.6% over the same period last year, and the net profit was 130 million yuan, down 8.51% from the same period last year.
Asset impairment and earnings of products other than gold and silver are a drag: the asset impairment in the first half of the year was 190 million yuan, mainly due to the provision for inventory price decline in the first quarter, and 2.75 million yuan in the same period last year. As commodity prices pick up, inventory prices are expected to turn back. The total gross profit in the first half of the year decreased by 14 million yuan, but the gross profit of gold and silver products increased by 120 million yuan over the same period last year. The company completed gold production of 24.83 tons, up 44.01 percent over the same period last year; silver output of 395.25 tons, up 49.17 percent; electrolytic copper output of 70200 tons, up 8.83 percent over the same period last year; and sulfuric acid of 581500 tons, down 8.67 percent over the same period last year.
Jiangxi Copper plans to further increase its shareholding ratio, and the company's asset-liability ratio is expected to decline significantly after the completion of the rights issue: Jiang Copper acquired 29.99% of the company's shares in June last year, making it the largest shareholder. Jiangxi Copper plans to subscribe for 237614400 shares in this non-public offering, and Jiangxi Copper is expected to hold 44.48 per cent of the company upon completion of the offering, based on the estimated number of 237614400 shares. All the funds raised will be used to repay bank loans and replenish working capital. After the funds are in place, according to the company's financial data on June 30, 2020, the company's asset-liability ratio will drop from 72.34% to 59.00%.
With the start of the expansion of Liaoshang Gold Mine, the output of self-produced ore will be greatly increased: the total investment of the project is 1.23 billion yuan, the construction scale is 900,000 tons / year, and the service life is 20 years. The company estimates that after the completion of the project, the annual sales income will be 534.816 million yuan, and the profit will be 237.986 million yuan, which is about 78% of the company's net profit in 2019. Within the scope of Liaoshang mining rights, there are a total of 20,0360,000 tons of geological resources, 75.5 tons of gold and metal, with an average grade of 3.71 grams per ton. The amount of industrial ore is 17,0405 million tons, the amount of gold and metal is 69.9 tons, and the average grade is 4.02 grams / ton. According to the calculation of mining scale, the annual contribution of mineral gold output is about 3-4 tons. After reaching production, the company's mineral gold output will increase from the current 1.5-2 tons to 5 tons.
Maintain the "highly recommended-A" investment rating. It is estimated that the net profit from 2020 to 2022 is 498 million yuan, corresponding to the price-to-earnings ratio of 38X/35X/29X. Jiangxi Copper's positioning of the company as a gold plate platform, we judge that the possibility of future resource injection and mergers and acquisitions is high. Considering that the price-to-earnings ratio of the company is much lower than that of its gold counterparts and has a strong growth in the future, it is highly recommended for rating.
Risk tips: the construction and production schedule of the project under construction is less than expected, the price of the main product falls sharply, the risk of production safety, the risk of failure of non-public offering, and so on.