Domestic copper processing enterprises with advantages, expanding production capacity in all directions
Zhengzhu Jintian Co., Ltd. focuses on the copper processing industry, integrating recycled copper smelting, copper processing, and copper deep processing. It is one of the most complete, diverse, and large-scale copper and copper alloy materials manufacturers in China. At the same time, it is also one of the few domestic enterprises that can meet the one-stop procurement needs of customers for various categories of copper processing products such as bars, tubes, strips and wires. In the first half of 2023, the company achieved a total output of 911,900 tons of copper and copper alloy materials, an increase of 7.75% over the previous year; external sales volume of 875,400 tons, an increase of 16.74% over the previous year, and continued to maintain its leading position in the industry. Among them, sales of copper products used in the fields of new energy vehicles, photovoltaics, wind power, etc. were 86,500 tons, an increase of 10% over the previous year, and the market share continued to increase.
Revenue growth has slowed, and GuiMu has declined year over year. During 2018-2022, the company's revenue continued to grow, with a compound growth rate of 25.61%. In 2022, the company's revenue was 101.90 billion yuan, +24.68% year-on-year, mainly due to the gradual release and digestion of production capacity for copper wire products in initial public offerings and 2021 convertible bond fundraising projects, and an increase in copper wire (row) product sales; net profit of 420 million yuan, -43.30% year-on-year, mainly due to weak demand in the downstream market. The decline in processing fees for some of the company's copper products compounded the rise in electricity and natural gas prices, driving up costs. According to the company's semi-annual report for 2023, 23H1's revenue and net profit were 53.358 billion yuan and 295 million yuan respectively, compared to +5.78%/-24.23%. The revenue growth rate has further slowed down, and the reduction in Gimu's net profit has improved. Revenue for the second quarter was 29.345 billion yuan, +1.11% year on year, up 22.20% from Q1; net profit for the second quarter was 211 million yuan, -17.47% year on year, +151.19% month on month.
Focusing on the main copper processing business, we will expand production capacity in all directions. The total capital raised by this offering will not exceed RMB 1.45 billion (inclusive). After deducting the issuance fee, it will be invested in: (1) “Electromagnetic flat wire project for new energy vehicles with an annual output of 40,000 tons”. The project will purchase a total of 125 units (sets) of equipment such as buildings and new high-frequency annealing automatic plate changers (including rolling mills). The products are mostly used in NEV driving motors, and the price is 80,768 yuan/ton (excluding tax). The annual revenue after delivery is 3,232 billion yuan. (2) “Small-diameter thin-walled high-efficiency copper pipe project with an annual output of 80,000 tons”. The project built a copper tube workshop and purchased 97 production and auxiliary equipment such as continuous casting furnaces and noodle milling machines, etc., with an estimated annual revenue of 5.326 billion yuan. (3) “Precision copper alloy bar project with an annual output of 70,000 tons”. The project built a copper bar workshop, etc., and purchased a total of 405 units (sets) of main production auxiliary equipment such as 12T furnaces and tractors. The annual revenue is estimated to reach 3.137 billion yuan. (4) Replenish working capital.
Analysis of debt conversion terms and listing pricing
Jintian Co., Ltd. announced on August 24, 2023 that gold and copper convertible bonds will be listed on August 28. The issuance scale of gold and copper bonds was 1,450 billion yuan, and the debt rating was AA+. According to the calculation of 3.3740% yield on corporate bonds of the same grade as Chinese bonds on August 25, the debt base was about 92.69 yuan. On August 25, the parity of gold and copper bonds was 94.81 yuan, providing a strong safety cushion.
According to the closing price of Jintian Co., Ltd. on August 25, 2023, the conversion price was estimated at 94.81 yuan. The listing price was predicted separately using the two methods of premium rate fitting and comparable securities. The results are as follows: (1) Referring to our premium rate fitting model, it is estimated that the conversion premium rate on the first day of listing of gold and copper convertible bonds is expected to be around 29.98%. For the August 25 parity, the listing price of gold and copper convertible bonds is expected to be 123.24 yuan. (2) Referring to Zhonghe Convertible Bonds (conversion premium rate of 30.44%) and Wanshunzhuan2 (conversion premium rate of 28.32%), which currently have the same industry and the same ratings, it is estimated that the conversion premium rate for the first day of listing of the Gold and Copper Convertible Bonds is expected to be in the 25%-30% range. For the August 25 parity, the listing price of the Gold and Copper Convertible Bonds is expected to be 118.52-123.26 yuan.
Risk warning:
Raw material prices fluctuated, exchange rates fluctuated, and projects fell short of expectations.