Acquisition of Shuikoushan Co., Ltd. and Zhuye Nonferrous: In April 2022, the company plans to purchase 100.00% of Shuikoushan Group's shares through the issuance of shares and cash payment at a transaction price of 3.32 billion yuan; at the same time, it will purchase 20.83% of Zhuye Nonferrous's shares held by Xiangtou Jinye, with a corresponding transaction price of 581 million yuan.

Achieve self-supply of zinc raw materials and successfully transform into a resource mining enterprise: The design scale of the “Shuikoushan Lead-Zinc Mine Development and Utilization Plan” is 800,000 tons/year. Currently, the Kangjiawan mine section is undergoing technical improvement work. It is expected to be completed by the end of 2023. After delivery, the company's zinc concentrate/gold/silver is expected to reach more than 22,000 tons/1.8 tons/326 tons. Listed companies have been able to supply their own raw materials, and the level of gross margin has been raised.

2023 performance: The net profit due to mother is expected to be 600 million yuan to 720 million yuan in 2023, an increase of about 967.41% to 1180.89% year on year. After the review, it is expected to increase by about 22.95% to 47.54% year on year.

Investment advice: The company is expected to achieve operating income of 201.18/219.36/23.506 billion yuan in 2023/2024/2025, up 28.33%/9.03%/7.16% year on year; net profit to mother is 6.67/9.18/1,166 billion yuan respectively, up 1087.47%/37.47%/27.10% year on year, and corresponding EPS of 0.62/0.86/1.09 yuan respectively. Based on the closing price of 9.27 yuan on February 6, 2024, the corresponding PE corresponding to 2023-2025E was 14.90/10.84/8.53 times, respectively. First coverage, giving a “buy” rating.

Risk warning: macroeconomics fall short of expectations, policy uncertainty; project progress falls short of expectations, etc.