Core views
The company's net profit for the first three quarters was 134 million yuan, a year-on-year decrease of 39.16%. The decline in zinc prices, the silver grade of subsidiaries, and production dragged down performance. The mining license of the subsidiary Jinshan Mining has expanded, and high-grade silver and gold ore bodies have been discovered in depth. It plans to carry out technical reforms in mining and mineral processing, which will affect production in the short term, but technical indicators and profitability will be improved after the technical reform is completed. The company's production capacity expansion is progressing steadily, and continues to stabilize its leading position in domestic silver. The company plans to acquire no less than 53% of Honglin Mining's shares, control the Caiyuanzi Copper and Gold Mine, become an up-and-coming gold mine, and strengthen the precious metals strategy. Silver and gold production is expected to grow steadily in the future.
occurrences
The three-quarter report was released, with cumulative net profit of 134 million yuan, a year-on-year decrease of 39.16%. Shengda Resources released its report for the first three quarters of 2023. During the reporting period, the company achieved operating income of 1,503 billion yuan, an increase of 23.32% over the previous year; net profit attributable to shareholders of listed companies was 134 million yuan, a decrease of 39.16% over the previous year. Looking at a single quarter, the third quarter achieved revenue of 686 million yuan, up 11.76% year on year and 27.93% month on month; net profit was 72.777 million yuan, down 37.55% year on year.
Brief review
The decline in zinc prices dragged down performance, and Everbright silver production declined
Silver, zinc, and lead are the company's main metal products. According to Baichuan data, as of the first three quarters of 2023, the average price of silver was 5.44 yuan/gram, +16.67% year-on-year, the average price of zinc concentrate was 152,000 yuan/ton, -20.63%, and the average price of lead concentrate was 13,900 yuan/ton, +2.22% year-on-year.
Although the price of silver rose, the price of zinc concentrate fell significantly, which dragged down the company's overall performance. In addition, the grade and production of silver in the mining section of Everbright Mining, one of the company's main mines, declined during the year. Although Everbright's zinc grade and products rose, it was not possible to completely make up for the reduction, causing the Everbright Mining industry to be affected a lot; the decline in silver grade in the mining section of Everbright at this stage was phased, and the grade rebounded in the third quarter.
Technological reforms in Jinshan mining affect production in the short term. After completion, the subsidiary Jinshan Mining has completed the change of silver mining licenses for the III-III mining section of the Erentaulegai mining area. It is confirmed that the mining depth was changed from 701 meters to 221 meters to 701 meters to 118 meters. High-grade silver and gold ore bodies have been discovered in deep mining areas. The company plans to invest 120 million yuan in mining technology reform. The project cycle is no more than 12 months. At the same time, the selection plant will be remodeled. It is proposed to change the existing 3,000t/d leaching process production line to a flotation process to meet the needs of recycling and comprehensive utilization of various metals after the transition of ore properties to polymetallic mining. The investment amount is 30 million yuan, and the project period is no more than 18 months. The technical reform period of the gold mine had a certain impact on mine selection, but it was relatively controllable. After the technical reform was completed, the development of high-grade silver and gold ore bodies and the flotation process increased the recovery rate, so as to reduce mine costs and increase efficiency.
The company's production capacity expansion is progressing steadily, and Baiyin's leading advantage continues to be consolidated. Dongsheng Mining's 250,000-ton mine construction project is progressing. It has been approved by the Inner Mongolia Development and Reform Commission. It is currently processing relevant reporting procedures for urban and rural planning, land use, environmental protection, energy saving reviews, production safety, soil and water conservation, etc., and is striving to begin construction this year. If progress goes smoothly, mine construction is expected to be completed in one to a year and a half, leading to a significant increase in silver production. Yindu Mining is currently advancing the geological survey of 1.43 square kilometers of prospecting rights in the north, and has prepared a first draft exploration report, which is currently undergoing review and filing procedures. Deyun Mining is currently going through the relevant procedures for exploration and transfer. Under the guidance of the new policy, the progress of mine development work is expected to accelerate.
It plans to acquire 53% of Honglin Mining's shares and become an up-and-coming gold company
The company plans to acquire no less than 53% of Honglin Mining's shares through a capital increase of no more than 300 million yuan. Honglin Mining's core asset is the Caiyuanzi Copper and Gold Mine in Muli County, Liangshan Prefecture, Sichuan Province. Six industrial ore bodies (1, 2, 3, 4, 5, 6) have been discovered in the Caiyuanzi copper and gold mine area. Among them, No. 2 and 3 ore bodies are the main ore bodies. The total amount of resources (331+332+333) of the industrial ore has been determined (331+332+333), the amount of gold and metal resources is 17,049 kg, the average grade is 2.82 g/ton, and the average grade is 0.48%. In 2020, construction of the middle sections of the production roadway, such as +2780m, +2730m, and +2680m, was completed. Geological data showed good prospecting potential.
Profit forecast: We expect the company's revenue in 2023-2025 to be 20.12/20.49/2,849 billion yuan, with a growth rate of 7.08%/1.83%/39.04%, respectively. The company's net profit from the mother is 3.43/4.23/704 billion yuan, a growth rate of 8.40%/22.30%/59.50%, and PE is 22/18/11 times, respectively, giving a purchase rating of 22/18/11 times.
Risk warning: 1. The company's production growth depends on the construction or expansion of mines in Dongsheng, Yindu, Jinshan, and Deyun, but mine construction faces various uncertainties from policy, environmental protection, natural conditions, human factors, etc., so the construction and commissioning time of mining projects may be delayed; 2. Production in mining production is affected by various aspects such as production time and ore grade. If production time is shortened due to natural factors or policy factors, or ore grade declines, mine production is affected; 3. Prices of precious metals at home and abroad are affected by the Federal Reserve's monetary policy, The economic situation, industrial demand, etc. have a lot of influence, such as the United States If the Fed's interest rate hike exceeds expectations and future interest rate cuts fall short of expectations, then prices are possible; 4. The impact of Jinshan mining technology reform on production exceeds expectations, and the technical reform time exceeds expectations; 5. The Caiyuanzi copper and gold mine was not delivered smoothly, and the speed of investment and construction fell short of expectations.