Incident: The company recently released its semi-annual report for 2023. In the first half of the year, it achieved operating income of 12.98 billion yuan, +17.8% year on year, and realized net profit of 280 million yuan, +4.8% year on year. Looking at Q2 alone, the company achieved operating income of 7.31 billion yuan (+40.8%) and net profit of 170 million yuan (+0.0%). In terms of product sales, the total sales volume of gold in January-June was 27731 kg, of which 2114 kg was self-produced and sold, -6.7%; the total sales volume of antimony in January-June was 13,713 tons, of which 8306 tons were self-produced and sold, -20.14%; the total sales volume of tungsten in January-June was 628 tons, of which the self-produced sales volume was 163 standard tons, -75% year-on-year.
Gold: Gold maintained a high boom, and the average price of gold increased 11.37% year over year. 23H1 achieved gold business revenue of 11.968 billion yuan, +28.39% year on year, and total gold output of 27.87 tons, +15.20% year on year. Among them, the production of non-standard gold purchased reached 25.61 tons, +28.26%, self-produced gold reached 2.27 tons, -7.97% year on year, and gross margin of self-produced gold reached 52% compared to last year. Benefiting from the high popularity of gold, the average sales price of gold is 436 yuan/gram, +11.37% over the same period.
Antimony products: The mining model has changed. The production of antimony products dropped significantly in the first half of the year, and the production of antimony products is expected to increase in the second half of the year.
23H1 achieved antimony product business revenue of 873 million yuan, a year-on-year ratio of -39.60%, a total output of 14,297 tons, -20.62% of the same period, an annual output of 8,880 tons of antimony products, -19.46%, and a gross profit margin of self-produced antimony of 57.55%, -5.34 pct. Antimony production declined due to changes in antimony mining methods. For example, the Chenzhou mining industry switched to centralized mining. The volume distribution between quarters was uneven. Overall, there was little impact on annual production. Self-production of antimony products is expected to increase in the second half of the year; on the price side, the average sales price of antimony ingots is 72,000 yuan per ton (excluding tax price), +3% over the same period.
The three fees have dropped significantly, and the reform of state-owned enterprises has achieved remarkable results. During the reporting period, the company's sales expenses were 8.7619 million yuan, -18.25%; management expenses of 316.5246 million yuan, -5.68% of the same period; financial expenses of 805,700 yuan, or -93.04%, mainly due to declining debt ratios and interest expenses. The company's cash flow performance was healthy; R&D expenses were 124.1634 million yuan, -12.77% year-on-year.
According to the company's semi-annual report, we made hypothetical adjustments such as increasing the gold production and sales volume and unit sales price of the company's products, lowering the production and sales volume and unit price of antimony products. We predicted that the company's earnings per share for 2023-2025 would be 0.56, 0.78, and 1.12 yuan, respectively (the original forecast values for 23-25 were 0.66, 0.97, and 1.22 yuan). Using relative valuations, based on the comparable company's valuation of 23 X PE in 2023, the corresponding target price was 12.88 yuan, and the purchase rating was maintained.
Risk warning: Risks such as the risk of macroeconomic fluctuations, the Fed's interest rate hike exceeding expectations, the expansion of the company's new construction projects falling short of expectations, the company's gold self-production rate falling short of expectations, and future prices and gross margin of antimony varieties falling short of expectations