Investment logic

The strategic path of "one body and two wings" is to build the whole industry chain resource company. The company's mines at home and abroad retain 6.93 million tons of zinc metal resources, 3.26 million tons of lead metal, 1.26 million tons of copper metal, 6012 tons of silver metal and gold, cobalt, nickel and other metal resources. In 2022, the concentrate contains 274000 tons of lead and zinc metal. The company strives to achieve revenue of 100 billion yuan and profits of more than 2 billion yuan by the end of the 14th five-year Plan, to formulate the strategic implementation path of "one body and two wings", that is, to enhance the controlled lead, zinc and copper metal resources, and to build the lead, zinc and copper smelting and intensive processing industry chain, especially the copper industry chain.

Lead, zinc and copper consumption has been improving for a long time. Lead and zinc are associated minerals. Due to the decline of exploration expenditure in the early stage of incremental projects and the limited growth of stock project resources, the growth rate of lead and zinc concentrate supply slows down. The new infrastructure creates room for long-term growth of zinc consumption, and lead demand is relatively stable. Zinc prices from 2023 to 2025 are expected to be 2.17 million yuan / ton under the decline in supply growth and steady growth in demand, and the lead price center will maintain 152million yuan / ton when supply and demand are stable. There has been little capital expenditure on copper mines in the past few years, and the growth rate of mine-end supply is likely to decline from 2024, while the Fed's interest rate hike cycle ends, the suppression of copper prices by macro factors will ease somewhat, and the copper price center is expected to maintain a high of 69,000 yuan / ton.

Zinc smelting slag project put into production to increase lead and zinc smelting capacity. The company's three lead-zinc mines, Fankou lead-Zinc Mine, Panlong lead-Zinc Mine and Brocken Mountain lead-zinc mine, and two smelters in Danxia and Shaoguan have an annual lead-zinc mining capacity of 300000 tons and lead-zinc smelting capacity of 420000 tons by the end of 2022. The increase in production capacity comes from the increase of 116100 tons of lead ingots in the Danxia smelter zinc slag project that was put into operation in June 2022. It is expected that the company's lead and zinc smelting capacity will reach 464100 tons after the above projects reach production.

And watch Jin Lingnan Copper Industry, switch to the copper industry chain. The company took over Shandong Zhongjin Lingnan Copper Industry in February 2023 and realized the amalgamation. The above-mentioned enterprises have a revenue of 11.3 billion yuan in 2021, have a copper smelting capacity of 700000 tons, and have a current starting capacity of 400000 tons. It is estimated that with the promotion of technological transformation projects and the release of production capacity, cathode copper sales in 2023-2025 will be 10,000 tons in 40-50-60. A total of 1.26 million tons of copper resources controlled by the company, won two copper polymetallic exploration rights in Guangdong Province at the end of 2022, copper resources are expected to further thicken, controlling shareholder Guangsheng holding Group of Dabaoshan Mine and Pan-Australian Company Frieda River project retain 12.218 million tons of copper resources, Maimeng Mine 2 million tons / year project will achieve coordination with copper smelting, reduce cathode copper raw material costs and show integration advantages.

Gallium arsenide single crystal was successfully prepared and entered into semiconductor materials. By the end of 2022, Fankou lead-Zinc Mine has 760 tons of gallium metal and 128 tons of germanium metal, and plans to produce 16.5 tons of gallium in 2023. Since May 2023, Shaoguan smelter has successfully synthesized gallium arsenide polycrystals, 6N high purity indium and high quality gallium arsenide single crystals, laying a solid foundation for the annual production of 860000 pieces of high purity semiconductor substrate materials.

Profit Forecast & Investment suggestion

It is estimated that the revenue of the company from 2023 to 2025 is 856991.9 billion yuan respectively, and the net profit of returning to the mother is estimated to be 15.481.810pm 2.422 billion yuan, the EPS is 0.41 pm 0.48pm 0.65 yuan, and the corresponding PE is 14.13pm 12.08pm 9.03 times respectively. With reference to the comparable company's 15 times PE valuation in 2023, the company is given 15 times PE in 2023, with a target price of 6.21 yuan, with a "buy" rating for the first time.

Risk hint

The release of production capacity is less than expected; product prices fluctuate sharply; the risk of RMB exchange rate fluctuations.