Lead-zinc leaders have deep roots to build a multi-metal international resource company. Since its establishment, the company has developed for nearly 40 years. It has formed five major business segments: mining, smelting, new material processing, trade finance, and engineering technology, and has become a leading enterprise in China's non-ferrous metal lead and zinc industry. Its resources are widely distributed in China, Australia, Dominica, Ireland and other countries, and it is expected to become a world-class resource company for the entire international multi-metal industry chain.

Mineral resources are abundant, and technical improvement and production expansion projects are on the horizon. By the end of 2022, the company's mines had metal resources of 6.93 million tons of zinc, 3.26 million tons of lead, 6012 tons of silver, 1.26 million tons of copper, 20,807 tons of cobalt, 66 tons of gold, and 92,400 tons of nickel. Relying on superior mining resources, the company is speeding up production expansion. Among them, the Panlong Lead-Zinc Mine Phase III 6,000 tons/day expansion project is expected to be completed and put into operation in 2024. After delivery, an additional 30,000 tons of lead/zinc metal will be produced; the Dominican Maimon mine has excellent resource endowments, high copper metal content, and the 2 million ton underground mine project is progressing steadily. It is expected to be put into operation in December 2024. After delivery, the concentrate is expected to produce about 32,000 tons of zinc, about 26,000 tons of copper, and about 89024 kilograms of silver. Tons will be the company's main source of profit growth.

Absorb square companies to build a full copper industry chain. In August 2022, the company reorganized Fangyuan enterprises and fully dominated the production, management and operation of copper smelting enterprises at the end of 2022. After the completion of this merger and acquisition, the company obtained 700,000 tons of cathode copper production capacity, 650,000 tons of anode plate production capacity, and 217,600 tons of recycled copper production capacity. At the same time, the company obtained two copper prospecting rights in Guangdong at the end of 2022, actively building a “copper mine-copper smelting” industry chain layout, and starting the company's second growth curve.

Lay out new materials and explore diversification. Huajiari produces 25,000 tons of aluminum profiles per year. Currently, it is actively developing the “Large Complex Section Extruded Profiles and Products for 6XXX Series High-Strength Alloy Vehicles” R&D project, which is expected to become a new profit growth point for the company in the future. Relying on the company's rich zinc resources, CICC Technology has become one of the world's important suppliers of zinc powder for alkaline batteries.

Profit forecast and investment suggestions: Select Chihong Zinc/Germanium, Zijin Mining, Shengda Resources, and Jinhui Co., Ltd. as comparable companies, which also have lead-zinc and copper mining and mineral processing businesses. Based on the closing price of January 14, 2024, the average value of the comparable company's 2023-2025 forecast PE after adjustment is 19/16/11 times, respectively.

We expect the company's net profit to be 10.7/12.5/1.57 billion yuan in 2023-2025, respectively, and the corresponding EPS is 0.29/0.33/0.42 yuan/share. On January 14, 2024, the company's closing price was 4.23 yuan, corresponding to the 23-25 PE was 15/13/10 times. The valuations were all lower than the industry average. In 2024, the company was given 16 times PE according to the industry average, corresponding to the target price of 5.34 yuan. It was covered for the first time, and the company was given a “buy” rating.

Risk warning: the price of mineral products falls short of expectations, and the release of production capacity falls short of expectations