The company disclosed results for the first three quarters of 23 years. In the first three quarters of 23 years, the company achieved net profit of 134 million yuan, a year-on-year decrease of 39.16% over the previous year, and realized net profit after deducting 130 million yuan, a year-on-year decrease of 41.70%. Looking at a single quarter, the company achieved net profit of 73 million yuan in Q3 of '23, a year-on-year decrease of 37.55%, an increase of 62.12% over the previous year; net profit after deducting non-return mother was 75 million yuan, a year-on-year decrease of 37.22%, and an increase of 77.54% over the previous year.
The price of silver has risen sharply. The average spot price of silver on the Shanghai Stock Exchange in the first three quarters of 23 years and the average spot prices of lead and zinc in China were 5.45 yuan/kg, 156,000 yuan/ton, and 21,800 yuan/ton, respectively, with year-on-year changes of +16.39%, +1.84%, and -14.65%, respectively. Looking at a single quarter, the average spot prices of silver, lead, and zinc in Q3 in '23 were 5.75 yuan/gram, 16,000 yuan/ton, and 21,000 yuan/ton, with year-on-year changes of +33.58%, +6.83%, and -14.17%, respectively, and +3.85%, +5.32%, and +0.44%, respectively.
The fee rate for the period decreased year over year. The sales expense ratio for the first three quarters of 23 years was 0.07%, down 0.01 pct year on year; management expense ratio was 11.23%, down 0.84 pct year; R&D expense ratio was 0.90%, up 0.10pct year on year; and financial expense ratio was 3.16%, down 1.14 pct year on year.
Dongsheng Mining's mining project obtained approval for the forest land audit. The company indirectly holds 70% of Dongsheng Mining's shares through its holding subsidiary Yindu Mining. Dongsheng Mining has resource reserves of 556.32 tons/131,000 tons/46,000 tons/46,000 tons of silver/lead/zinc metals; it has associated silver/lead/zinc/gold/gallium/arsenic/sulfur amounts of 34.06 tons/0.55 million tons/0.55 million tons/0.23 million tons/0.26 tons/32.01 tons/11,400 tons/123,900 tons. We believe that the approval of Dongsheng Mining's 250,000 tons/year mining project is conducive to advancing the rapid development and construction of Dongsheng Mining's mine.
Jinshan Mining started a technical reform project. The investment amount for the mining engineering technological transformation project is expected to be no more than RMB 120 million, the project cycle is expected to be no more than 12 months, the deep infrastructure project is expected to be accepted in October 2024; the investment amount for the mineral processing plant technological transformation project is expected to be no more than 30 million yuan, and the project cycle is expected to be no more than 18 months. We believe that the technological transformation of mining engineering is conducive to improving the efficiency of deep ore mining in mines, ensuring safe production for workers, and transforming the results of deep prospecting; beneficiation plant engineering technology transformation will shorten the beneficiation process, increase silver and gold recovery rates, reduce beneficiation costs, and at the same time comprehensively recycle valuable elements such as lead and zinc to improve the economic efficiency of mines.
Profit forecasting and valuation. The company's silver business accounts for a high share of gross profit and will fully benefit from rising silver prices. We expect that in the next three years, as production expansion projects are gradually put into operation, the company will usher in investment opportunities where volume and price will rise sharply. We expect the company's EPS for 23-25 to be 0.48, 0.50, and 0.74 yuan/share, respectively. Referring to the valuation levels of comparable companies, the PE valuation was 28-29 times that of 2023, corresponding to the reasonable value range of 13.34 to 13.82 yuan/share, giving it a “superior to the market” rating.
Risk warning. Production expansion has fallen short of expectations; the Federal Reserve has raised interest rates beyond expectations; and raw material costs have risen.