Key points of investment:
The low seasonal operating rate in the first quarter was compounded by rising mining costs, and 2023Q1's performance fell short of expectations. The company issued a performance announcement. It achieved revenue of 1,879 million yuan in 2022, an increase of 14.73% over the previous year, and achieved net profit of 365 million yuan, a decrease of 13.5% over the previous year; of these, Q4 achieved revenue of 660 million yuan in a single quarter, a decrease of 1.9% over the previous year, and achieved net profit of 144 million yuan, a decrease of 20.8% over the previous year. The 2022 results were in line with expectations. The company achieved revenue of 281 million yuan in 2023Q1, an increase of 21.4% over the previous year, and achieved net profit of 16 million yuan to the mother, a decrease of 53.7% over the previous year. Q1 performance growth fell short of expectations. Currently, the company's main mines are located within the Inner Mongolia Autonomous Region. Harvesting is greatly affected by the season. The operating rate in the first quarter is usually seasonally low. On the other hand, due to rising mine filling costs and raw material costs, the company's mining costs have risen, and 2023Q1 performance has declined year-on-year.
Key mining projects continue to advance, and exploration, recovery and investment in various mines are being carried out in an orderly manner. The integration of prospecting rights on the periphery and deep prospecting rights of the mining rights and deep mining rights of the mining rights in the Gairentaolegai mining area of Jinshan Mining has been approved by the Hulunbuir Municipal People's Government, which is conducive to further exploration and processing of mining procedures and extending the service life of Jinshan Mining to expand resource security. Yindu Mining obtained a prospecting license for the 1.43 square kilometer northern Bayern Daba Silver Polymetallic Mine Survey. Deyun Mining has received approval from the Chifeng Natural Resources Bureau to define the scope of the mining area, and is currently carrying out feasibility studies and verification and exploration and mining processing. Dongsheng Mining is actively carrying out preparations for mine construction. The mine production scale is 250,000 tons/year.
Investment attributes resonate with industrial demand, and there is high certainty that silver prices will rise. From the perspective of commodity attributes, the balance between global silver supply and demand in 23-25 is expected to be -92.2/-150.1/-220.6 million ounces respectively, mainly driven by a sharp increase in PV installed capacity. At the same time, silver has a value preservation function as a precious metal. It is expected that the Federal Reserve will enter the interest rate cut channel in 23H2, which is expected to enter a downward environment in real interest rates, and precious metals such as silver will receive upward support. The combination of investment attributes and supply and demand continues to tighten, and the price of silver is expected to receive upward support.
The upward trend in silver prices continues, and the company is expected to fully benefit and maintain its rating of increasing holdings. The company is a leading domestic silver resource leader, with silver reserves of nearly 10,000 tons. It owns 6 high-quality silver polymetallic mines, 4 of which are production mines. In addition, the exploration, mining and investment processes of Jinshan Mining, Yindu Mining, Deyun Mining, and Dongsheng Mining are progressing in an orderly manner. Future business will continue to focus on the direction of precious metal resource mining, which is expected to fully benefit from the upward cycle of silver prices. Maintaining the 23-24 profit forecast and adding the 2025 profit forecast, the company is expected to achieve net profit of 4.7/55/ 701 million yuan in 2023-2025, corresponding to PE of 28/23/18 times, respectively, maintaining the increase in holdings rating.
Key points of investment:
Risk warning: production capacity planning falls short of expectations, risk of safety accidents in mining areas, risk of the Federal Reserve's interest rate hike exceeding expectations, risk of rapid decline in inflation, risk of asset impairment (according to the “Shengda Metal Resources Co., Ltd. Plan for Issuing Shares to Purchase Assets and Raise Supporting Capital and Related Transactions (Revised Draft)” announced by the company on November 27, 2021, the company paid a deposit of 500 million yuan to counterparties Dong Ying and Bai Guanghui on March 1, 2021, and has already paid a deposit of 100 million yuan after obtaining pledge rights for 20% of the target company's shares. On January 19, 2023, the company announced that it had decided to terminate the restructuring matter based on the failure of the Pig Gongtang lead-zinc mine to complete the approval procedures for construction project approval, land acquisition, relocation and resettlement of residents in the mining area, safety and environmental protection within the prescribed period in accordance with the agreement. The company would urge Dong Ying and Bai Guanghui to return the deposit of 600 million yuan already paid by the company within 5 working days from the date of receipt of the cancellation notice issued by the company. On March 28, 2023, the company announced that a lawsuit was filed with Beijing No. 3 Intermediate People's Court in the contract dispute with Dong Ying and Bai Guanghui. According to the progress disclosed on April 29, the lawsuit is still under trial. If one of the following scenarios occurs: (1) the sharp reduction in the equity of the target company is insufficient to cover the deposit amount; (2) the transaction partner has many other debts and the deposit cannot be fully repaid; (3) other situations where the listed company is unable to receive priority payments, the risk of the company's future asset impairment loss or loss of profits is not ruled out.)