Core views:
Benefiting from the rise in molybdenum prices, net profit to mother increased 174% year-on-year in 23Q3, and the performance was in line with expectations. According to the 2023 three-quarter report of Gold and Molybdenum Co., Ltd., the company's 23Q3 revenue and net profit to mother were about 3.3 billion yuan and 800 million yuan respectively, up 54% and 174% year-on-year respectively, and 28% month-on-month. During the 23Q1-3 period, the company's revenue and net profit to mother were about 885 billion yuan and 2.34 billion yuan respectively, up 25% and 140% year-on-year respectively. According to Wind data, during the 23Q1-3 period, molybdenum prices fell first and then rose. The overall high level fluctuated, and the average price of molybdenum rose 20% month-on-month in 23Q3.
Molybdenum: Stable supply and demand, grasping the upward pace. Our 3/19/23 report “Molybdenum:
It is stated in “Stable Supply and Strong Demand, Seize the Upward Pace”: Continued supply shortages in the medium term are expected to support steady, moderate and strong prices, and focus on the pace of steel procurement volume. Supply and demand: Over the past 10 years, the fluctuation in the growth rate of molybdenum supply gradually narrowed, and supply was weaker than demand in 21-22. Direction: The gap between supply and demand is correlated with molybdenum prices. Taking into account overall, the increase in supply mainly comes from a small number of associated molybdenum ores at home and abroad (not considering the potential supply impact caused by declining grades of overseas associated minerals, regional political instability, and drastic climate changes); on the demand side, global demand is expected to be stronger than the supply growth rate in 23-24, and the gradual expansion of the supply and demand gap is expected to promote stable and strong molybdenum prices at home and abroad. Pace: Molybdenum prices are linked to downstream steel procurement. Along with macroeconomic recovery, the 23Q4 steel market is expected to gradually stabilize, focusing on the amount of inventory replenishment in the later stages.
Profit forecasting and investment advice: Give the company a “buy” rating. The company is expected to achieve EPS of 0.98/1.13/1.22 yuan/share in 23-25, PE corresponding to the closing price on October 27, 23 is 10/9/8 times, and the average PE valuation value of the company since the beginning of '22 is 15 times. The company is a leader in the molybdenum industry. Considering that the company benefits from the increase in molybdenum prices, referring to comparable company valuations, the company was given a 23 times PE valuation of 15 times, with a corresponding reasonable value of 14.73 yuan/share, giving the company a “buy” rating.
Risk warning. Stricter environmental standards have disrupted mine production or increased costs; trade protection may cause a decline in global economic growth to affect molybdenum demand; overseas copper-molybdenum companion mines may rapidly increase molybdenum supply by using molybdenum-rich and copper-poor copper mining methods, leading to a drop in prices.