Event: Yulong Co., Ltd. released its semi-annual report for 2023. The company's 23H1 revenue was 4,017 billion yuan, -19.37% year-on-year, and net profit of 257 million yuan, +138.96% year-on-year. Among them, Q2 revenue was 1,283 million yuan, or -41.6% year-on-year, and net profit for the parent group was 114 million yuan, or +257.3% year-on-year.
Pakingo achieved full production capacity, contributing to increased performance. 23H1 added 669 million yuan in gold business revenue, and NMQ, a wholly-owned subsidiary, contributed 671 million yuan in revenue and 227 million yuan in net profit. According to the announcement, the company's management team stationed overseas continues to optimize personnel, equipment, production plans, etc. in the Pagingo mining area, and has achieved remarkable results in reducing costs and increasing efficiency and improving quality and production. Currently, the Pacingo gold mine has reached full production capacity, and the 23H1 Pacingo mining area has achieved a gold production volume of 50,000 ounces (about 1.56 tons).
Accelerate the layout of new energy, new materials and mineral projects, and continue to enhance growth potential. 1) Vanadium mine: In March 2023, 67% of the shares in Shanjin, Shaanxi completed transfer registration and obtained a “mining license” for the vanadium ore project. The vanadium mine project broke through and landed, and construction is expected to begin at 23H2; 2) Graphite mine: The company became the second largest shareholder of Tuiteng Mining with a shareholding ratio of 11.44%. 23H1 Chuiteng Mining signed a FEED (front-end engineering design) contract for the Ankuabe Project. Currently, it is planned to design an annual processing capacity of more than 1 million tons of raw ore, and produce more than 60,000 tons of natural flake graphite concentrate; 3) The first phase design of the Liaoyang Shuangli silica mine project of Long Co., Ltd. The production capacity is 500,000 tons/year, and production is expected to be completed in March 2024.
Investment advice
The company's transformation into the mining industry is progressing steadily. The Pacingo gold mine has reached full production capacity. Projects such as vanadium ore, graphite ore, and silica mine are progressing gradually, and it is expected that two-wheel drive for gold and new energy materials will be achieved.
We expect the company's net profit for 2023-2025 to be 5.6/57/640 million yuan respectively (adding 2025 forecast), corresponding PE to 14.1/13.7/12.4 times, respectively, maintaining the “buy” rating.
Risk warning
Gold prices fluctuated greatly; exchange rates fluctuated greatly; mining gold production fell short of expectations.