Incident: Company discloses 2023 Annual Report & 2024 Quarterly Report. The company achieved revenue of 870 million yuan for the full year of 2023, +54.38% year over year, achieved net profit of 73.89 million yuan, 49.92% year over year, achieved net profit without return to mother of 7259 yuan, year-on-year to -56.93%, gross sales margin of 41.96%, a year-on-year decrease of 3.79 percentage points, and a net sales interest rate of 5.26%, a sharp decrease of 18.51 percentage points year-on-year. The company achieved revenue of 250 million yuan in a single quarter in 2024Q1, +47.65% month-on-month, +61.53% year-on-year, achieved net profit of 38.16 million yuan to mother, and reversed losses month-on-month, and +146.72% year-on-year. The company plans to distribute a cash dividend of RMB 22.83 million (tax included), with a dividend payment rate of 30.9%.

In 2023, Ta Aluminum Gold's production volume fell short of expectations, and costs increased after production was put into operation. After more than a year of production and commissioning, the 5,000 tons/day mining and production support system of the Ta Aluminum Gold Industry Project has reached the design and production scale of 5,000 tons/day. In terms of the amount of selected ore, the 2023 plan is 1.397 million tons, and the actual mining volume is 1.384,800 tons, with a completion rate of 99.10%; the amount of selected ore is 1.2419 million tons, with a completion rate of 88.90%. In terms of metal quantity, the planned gold was 1502.13 kg, with an actual completion rate of 66.70%; 5,200.00 tons of antimony were planned, 469.21 tons were actually completed, with a completion rate of 8.90%. The lower output was mainly due to the fact that in 2023 Taalu Gold's 5,000 tons/day mining and production system was further optimized according to production needs, the beneficiation process was adjusted, and the overall production capacity gradually climbed. Priority was given to the production of gold metals by concentrating resources, and some by-product ores lowered the grade of selected ores. Sales expenses etc. have increased due to the commencement of production of Takin. In 2024, the total investment of the company's Ta Aluminum Gold Industry's infrastructure project is 300 million yuan, and the total amount of ore mining and processing will reach 1.5 million tons. In 2024, the company plans to strengthen geological exploration work for mineral resource production in the Scanler, Chuerbo and Kangqiao mining sections; carry out geological resource exploration work for the company's “Puchik Gold Mine Prospecting Rights” located on the shores of Lake Istanbul in an effort to obtain mining rights; and conduct geological surveys on 5 additional sites on the periphery of the east and west wings of the Kangqiao mining area.

Domestic project production and operation are relatively stable, but falling zinc prices have put pressure on gross profit. The Zaxikang mine plans to produce 3,2341 tons of metal, with an actual completion rate of 32,383 tons (including: 1,5276 tons of zinc, 15085 tons of lead, 2022 tons of antimony), with a completion rate of 100.13%; the planned silver is 48,467 kg, with a completion rate of 121.16%; the Lawu mine plans to produce 705.93 tons of metal (including: 165.42 tons of copper and 540.51 tons of zinc), with an actual completion rate of 464.72 tons (including: 74.48 tons of copper and 390.24 tons of zinc), completion rate 65.83%. In 2024, the company plans to complete 600,000 tons of mining and mineral processing in Zhaxi. In terms of zinc prices, according to data from the Chamber of Commerce, the average spot price of zinc in 2023 was 2,1606 yuan/ton, a year-on-year decrease of 14.2%. We calculate that the average sales price per unit of zinc concentrate in 2023 was 10,181 yuan/ton, the unit sales cost was 6017 yuan/ton, and the gross profit per unit sales was 4,163 yuan/ton, a sharp decrease of 34.7% over the previous year.

Profit forecast. We expect the company to achieve revenue of 19.4/2.46 billion yuan in 2024-2026; achieve net profit to mother of 27/3.7/370 million yuan; and achieve EPS of 0.35/0.47/0.47 yuan, respectively. As of the close of April 26, 2024, the 2024-2026 PE was 27.5x, 20.4x, and 20.3x, respectively, maintaining a “buy” rating.

Risk warning: Construction of new projects fell short of expectations; existing mines stopped production due to climate disturbances; prices of gold and antimony dropped sharply.