Key points of investment
The company is a leading enterprise in the domestic banking industry, with a silver reserve of 9,300 tons. In 2022, the company produced 36,000 tons of lead powder (containing silver), 56,000 tons of zinc powder (containing silver), 79.91 tons of silver ingots, and 250.1 kg of gold. The company's next three growth points (Dongsheng Mining, Honglin Mining and Jinshan Mining) will strengthen the company's gold and silver production advantages.
The subsidiary Dongsheng Mining Bayanula Silver Polymetallic Mine Project is progressing in an orderly manner. The company indirectly holds 70% of Dongsheng Mining's shares through the holding subsidiary Inner Mongolia Yindu Mining Co., Ltd. Dongsheng Mining has resource reserves of 2.67 million tons of ore (proved+control+inference), 556.32 tons of silver metal, and an average grade of 284.90 g/ton. Continued progress of the Dongsheng Mining Project will further increase the company's silver metallurgy.
The company signed a framework cooperation agreement with Honglin Mining. A subsidiary of Enrich Company's Precious Metals Reserve Company plans to acquire no less than 53% of Honglin Mining's shares with a cash capital increase of no more than 300 million yuan. According to Honglin Mining's mining license, the production scale of the Sichuan Caiyuanzi copper and gold mine is 396,000 tons/year, with reserves of 17 tons of gold and an average grade of 2.82 g/ton. It is expected to enrich the company's gold and mineral reserves.
Jinshan mining technology reform releases new production capacity
The certified mining depth in the Eren Taolegai mine site of Jinshan Mining changed from 701 meters to 221 meters to an elevation of 701 meters to -118 meters. The depth of mining will be further expanded. The mining project part plans to use no more than 120 million yuan for technical reform, and no more than 30 million yuan for the technical transformation part of the beneficiation plant. The technical transformation of the project is expected to further increase the company's silver production.
Profit forecasting and valuation
We expect the company's revenue for 2023-2025 to be 19.73/2.016/2,707 billion yuan respectively, +5.01%/+2.16%/+34.28% year-on-year, and 2023-2025 net profit to mother of 3.97/4.03/569 million yuan, respectively, +8.98%/+1.32%/+41.42% year-on-year, and EPS 0.58/0.83 yuan respectively. Based on the company's industry status, future business growth, and comparable company valuations, we gave the company 25 times PE in 2024, corresponding to the company's stock price of 14.5 yuan/share, which covered the company's “buy” rating for the first time.
Risk warning
The progress of related projects fell short of expectations, the price of silver fell short of expectations, and downstream demand fell short of expectations.