The company announced its semi-annual report for 2023. 2023H1 achieved revenue of 3.447 billion yuan, -2.51% year on year; net profit of 253 million yuan, +134.61%; Q2 achieved revenue of 1,750 million yuan, -7.65%, +3.18%, month-on-month net profit of 154 million yuan, +541.67% year on year, +55.56% month on month. The Q2 non-recurring profit and loss items increased by 104 million yuan compared to Q1. After deducting the impact, operating profit increased significantly month-on-month.
The main business focuses on gold, and H1's profitability is steadily increasing. 1) The company's gold business achieved revenue of 3.147 billion yuan in the first half of the year, accounting for 91.3% of revenue, an increase of 0.8% over the previous year. The copper mining business achieved revenue of 128 million yuan, accounting for 3.7% of revenue, a decrease of 4.5% year on year; 2) The company's 23H1 gross profit margin was 39.00%, up 1.31 pct year on year; Q2 gross margin was 45.29%, up 9.41 pct year on year, and 12.8 pct over the previous year.
Production declined slightly, and investment in production safety increased. 23H1's total gold output was 11.77 tons, of which mineral gold production was 8.42 tons, down 2.69% year on year, smelting and processing gold was about 3.35 tons, down 31.14% year on year, and copper production was 2,648 tons, up 7.51% year on year. The comprehensive gram cost of mineral gold in the first half of the year was 214.67 yuan/gram, up 10.67% from 193.98 yuan/gram in 2022. The reason was that safety fee withdrawal standards increased, electronic detonators were promoted and used, and construction expenses increased. In the first half of the year, the company focused on safety management and invested 91 million yuan in capital to ensure a stable production safety situation.
Management quality and efficiency have been improved, and management and R&D expenses have been drastically reduced. 2023H1's financial expenses were 311 million yuan, up 11.05% year on year, mainly due to an increase in total interest-bearing debt; management expenses were 571 million yuan, down about 11.50% year on year; the company's administrative and other operating expenses in the first half of the year were about 867 million yuan, down 15.49% from the same period last year, mainly due to a decrease in R&D expenses; sales expenses of 115 million yuan, down about 12.56% year on year, mainly due to a decrease in gold sales transaction expenses. The company's long-term loans in the first half of the year were 8.787 billion yuan, an increase of 40.47% over the previous year, and the balance ratio was 58.38%, an increase of 1.28 pct over the previous year.
Prospecting and storage have been strengthened, and the “double point” project is progressing steadily. In the first half of the year, the company invested 54 million yuan in geological prospecting, completed 14,700 meters of excavation projects, 611,000 meters of drilling projects, and added 13.92 tons of gold and metals to prospecting. At the same time, the company is speeding up the promotion of “double key” projects, and all key projects such as the Ruihai mining and selection project, the Jintingling, and Caogoutou mining area renovation and expansion projects have been launched.
With the expansion of resources in the Gansu region, the development of marine gold mines can be expected in the future. In the first half of the year, the company successfully bid for the Beishan gold mine mining rights in Dunhuang City, Gansu Province with 148 million yuan. The mine has 17.26 tons of gold resources, an average grade of 10.58 g/ton, and good development prospects. Through a further increase in holdings in October 2022, the company holds 70% of the shares in the Haiyu Gold Mine. The Haiyu Gold Mine has now fully entered the fast track of construction. It is expected to be completed and put into operation in 2025. After completion of the project, the estimated mining scale is 12,000 tons/day. After delivery, it can contribute 15-20 tons of gold production per year. The full cost of gold is about 120 yuan/gram, and the profitability is excellent.
Profit forecast and investment suggestions: Considering that the company's “double point” project has entered an accelerated construction period, the company's net profit for 2023-2025 is estimated to be 823/11.45/1,990 million yuan respectively. Based on the closing price on August 30, the corresponding PE is 38/28/16 times, maintaining the “recommended” rating.
Risk warning: Product prices are falling, the Fed's monetary policy is at risk of fluctuation, and the project falls short of expectations.