Overall industrial chain layout, rising gold and antimony prices drive performance. The company lays out the entire gold, antimony and tungsten industry chain, and is a leading domestic antimony ore development leader. The revenue of the 1H23 gold and antimony business was 11,968/883 million yuan respectively, accounting for 92%/7% of revenue respectively. The gross profit of the gold and antimony business was 4060/340 million yuan respectively during the same period, accounting for 56%/41% of gross profit respectively, contributing to the company's main source of profit. 1-3Q23's own gold and antimony products were affected by discontinuation of production and grade, and production declined, but the year-on-year increase in gold and antimony prices led to an increase in revenue and performance.
The Federal Reserve's interest rate hike cycle is over, and the allocation period for gold stocks on the right side is confirmed. Wait for the main upward wave to arrive.
The Federal Reserve's December FOMC meeting confirmed the end of this round of interest rate hikes. Under the real interest rate framework, gold stocks are currently being allocated on the right side. It is expected that after the Fed officially releases a signal to cut interest rates, real interest rates will decline to push up the price of gold. At the same time, after the Federal Reserve officially releases a signal to cut interest rates, gold stocks will usher in a major upward wave.
The antimony industry has been undersupplied for a long time, and the gap between supply and demand is driving up antimony prices. (1) Supply side: Total mining restrictions and total export control make it difficult for enterprises to obtain prospecting rights and mining rights, making it difficult to increase domestic antimony resources; overseas Kangqiao antimony mine and Solonechenskoye projects are progressing or falling short of expectations. We expect the global antimony supply to be 11.9/12.4/131,000 tons respectively in 23-25. (2) Demand side: The high increase in photovoltaic installations is driving the demand for antimony for glass clarifiers. We expect global demand for antimony to be 13.8/14.7/155,000 tons in 23-25, respectively. Global antimony supply and demand remain in short supply. We expect the global antimony supply and demand gap to be 1.9/2.3/2.4 million tons in 23-25, respectively, driving the antimony price center to continue to rise.
Gold-antimony two-wheel drive, showing full potential for growth. (1) Gold business: The company continued to prospecting and increase reserves. At the end of '22, it had 144.90 tons of gold resource reserves, and gold resources continued steadily.
The production of self-produced gold in '22 and 1H23 was 4.61/2.27 tons, respectively. Gansu Jiaxin Mining obtained mining licenses for the Yidinan Copper and Gold Mine and the Xiaganmucang Gold Mine, which will contribute to the increase in self-produced gold production. We expect the company's own gold production to be 4/4.7/5.76 tons in 23-25, and the average price of gold in '23 is 450 yuan/gram. We expect the price of gold to be 485/490 yuan/gram in 24/25, respectively. Hunan Gold Group integrates resources from the Wangu mining area and plans to inject them into listed companies at the end of the 14th Five-Year Plan. At that time, it will further increase the company's resource reserves and self-produced gold production. (2) Antimony business: At the end of '22, the company had antimony metal resource reserves of 304,300 tons, accounting for 46% of the country's resource reserves. In '22, 1H23's production of antimony products was 3.07 to 14,300 tons, with self-produced antimony accounting for 61%/62% respectively. We expect the company's self-produced antimony production to be 1.85/1.9/19,500 tons respectively in 23-25. As a leader in the domestic antimony industry, it will fully benefit from rising antimony prices.
Profit Forecast & Investment Advice
We expect the company's revenue scale to be 234/256/265 billion yuan, and the net profit to be realized is 499/802/1,106 million yuan, EPS is 0.42/0.67/0.92 yuan, respectively, and the corresponding PE is 27/17/12 times, respectively. Referring to the 2024 PE valuation of a comparable company, considering the company's historical valuation level in the industry and the comparison with the growth performance of comparable companies, the company was given 20 times PE in 2024, with a target price of 13.40 yuan. For the first time, coverage was given a “buy” rating.
Risk warning
Risk of product price fluctuations, project construction falling short of expectations, safety and environmental management risks.