A leading domestic listed silver company with outstanding resource endowment advantages. The company was founded in 1995 and listed on the Shenzhen Stock Exchange in 2011. Since listing, through the asset injection of Shengda Group and the company's own mining, the company currently has 4 active mines and 2 mines to be produced. The mineral resource reserves are rich and of high quality. The reserves of silver resources are close to 10,000 tons, and the resource endowment is excellent. The current harvesting capacity is close to 2 million tons/year, corresponding to an annual silver production of about 210 tons.
Four major mines in production+two mines awaiting production to establish the company's leading position in silver
Performance “stabilizer”, four major mines in production: 1) Jinshan Mining, which has the largest silver mine with the largest single silver ore reserves in China, with a design capacity of 480,000 tons/year, a silver metal volume of 3291.49 tons, and an average grade of 206.44 g/ton; 2) Yindu Mining is one of the mines with the highest gross margin among domestic listed companies, with a design capacity of 900,000 tons/year, silver metal volume 2079.49 tons, average grade 228.78 g/year; 3) Jindu Mining, with a design capacity of 300,000 tons/year of silver, silver Volume 670.28 tons, average grade 264.6 grams /ton; 4) Everbright Mining, a national green mine, with a design capacity of 300,000 tons/year, silver metal volume 405.68 tons, and an average grade of 163.97 g/ton.
The “driving force” of performance growth, two major mines to be produced plus Jinshan expansion projects: 1) Dongsheng Mining, which has obtained a mining license of 250,000 tons/year, is currently in the construction stage. The amount of silver metal is 556.32 tons, with an average grade of 284.90 g/ton; 2) Deyun Mining is currently undergoing exploration and mining. The amount of silver resources is 1,072 tons, of which the silver grade is 140.7 g/ton; 3) In addition, Jinshan Mining is advancing 900,000 tons/year expansion project, which will significantly increase the company's production after reaching production.
Lay out the urban mining business and plan to become an “upstart” in the industry within 5 years. The company entered the urban mining business through the acquisition of Jinye Environmental Protection. As the first and second phase of the solid waste harmless comprehensive utilization project are put into operation, the company will establish a complete secondary new energy metal recycling industry chain centered on the recycling of metal resources such as nickel, copper, chromium, lithium, etc. The resource recycling business may become a new growth point for the company's performance. Furthermore, the signing of a framework agreement between the company and Sylway will help the company strengthen its “rare and precious metals” development business and gradually extend the strategic mineral resource layout for new energy, helping the company become a high-quality “up-and-coming” metal resource provider.
Precious metals may enter the main upward phase driven by interest rate cuts, and the company will fully benefit. We believe that a decline in the US economy is unavoidable. Combined with falling inflation and rising unemployment, the fastest time for the Federal Reserve to raise interest rates may have passed. The inflection point of the major precious metals cycle has been established. The recent bankruptcy crunch crisis that has continued overseas banks is essentially a confirmation of the risk at the end of the Fed's continued interest rate hike, or prompted it to end the interest rate hike cycle early. Gold prices have gradually moved from the “inflation/interest rate hike vs. recession” tug of war to push up the latter. In terms of silver prices, on the one hand, the overall price of silver and the price of gold showed the same rise and fall under investment attributes. On the other hand, the ratio of gold to silver is currently relatively high in history, and the price of silver is undervalued. In particular, the application of photovoltaics will significantly boost the attributes of the silver industry. With the development of the silver beta market, targets with outstanding resource advantages will fully benefit.
Profit forecast and investment rating: The company is a leading listed company in the domestic banking industry. Subsequently, as the Jinshan mining expansion project was gradually put into operation, production capacity was gradually released after the Dongsheng mining project was launched. Its silver production CAGR may reach about 15% in the next two years. At the same time, precious metals prices are expected to enter the main upward phase driven by interest rate cuts, and the company will fully benefit. Assuming that the price of silver was 4.7/5.5/6.0 yuan/gram in 2022-2024, the company produced 227/234/278 tons of silver in 2022-2024 respectively, achieving operating income of 1,660/18.22/2,209 billion yuan respectively, and the net profit of the mother was 407/469/614 million yuan. The current stock price is 18.51 yuan, and the corresponding PE is 31/27/21X. For the first time, coverage gave the company a “buy” rating.
Risk warning: Macroeconomic fluctuations exceeding expectations, risk of project construction falling short of expectations, risk of repeated epidemics, risk of production safety inspections exceeding expectations, risk of untimely updates of research and use information, risk of model calculation errors, etc.