Core views
The company's 2023 performance is under pressure, mainly affected by technical improvements and production cuts in some mines, disruptions in grade decline, and falling zinc prices. As a domestic silver leader, the company has a full silver production capacity of more than 200 tons, resources of nearly 10,000 tons, high quality, low cost, and outstanding scale and cost advantages. The company is actively expanding production, and will further strengthen the company's leading position in Baiyin after the completion of projects such as Dongsheng and Deyun. The company has strengthened its precious metals strategy, and the Caiyuanzi copper and gold mine, which was acquired, has basically met the conditions to start construction, making it an up-and-coming gold company. Gold and silver prices are expected to rise, the company's production capacity will expand, and the sharp rise in volume and price will lead to accelerated growth in the company's performance.
occurrences
Net profit attributable to mother in 2023 was 148 million yuan, down 59.41% year on year. On the evening of April 26, 2024, Shengda Resources released its 2023 annual report, stating that net profit attributable to owners of the parent company in 2023 was 148 million yuan, a year-on-year decrease of 59.41%; operating income of 2,254 billion yuan, up 19.92% year on year; basic earnings per share were 0.21 yuan, a year-on-year decrease of 60.38%.
Brief review
Due to the influence of some subsidiaries, performance was temporarily under pressure.
The company's net profit declined compared to 2022, mainly affected by Yindu Mining, Everbright Mining and Jinshan Mining. Among them, in 2023, Yindu Mining had revenue of 544 million yuan (-10.5%), net profit of 162 million yuan (decrease of 112 million yuan or 40.8%); Everbright Mining's revenue of 973 million yuan (-79.2%), net profit of 0.22 million yuan (decrease of 74 million yuan or 74.2%); Jindu Mining's revenue of 242 million yuan (-0.1%), net profit of 50 million yuan (decrease of 8.2%); Jinshan Mining's revenue of 274 million yuan (-41.8%), net profit decreased by 0.13 million yuan (0.13 million yuan) ( 0.92 billion yuan or 92.4%).
Zinc concentrate prices fell in 2023, and the company cut silver and gold production.
In 2023, the company's zinc concentrate (silver containing) production/sales volume was 24825.3 tons/27374.89 tons, respectively -8.54%/-0.47%, lead concentrate (silver) production/sales volume 13462.37 tons/13751.43 tons, -7.97%/-13.88% year over year, silver production/sales volume 145.09 tons/145.25 tons, -28.53%/33.20%, gold production/sales volume 148.02kg/148.02kg, YoY -40.82% /- 40.82% According to Baichuan data, the price of zinc concentrate in 2023 was 15,200 yuan/ton, a decrease of 19.2%. The decline in silver and gold production is mainly due to the impact of technical reforms in Jinshan mining. In 2022/2023, Jinshan mining's silver ingot production was 80 tons/37 tons, and gold production was 250kg/148 kg respectively. Deep in Jinshan mining, mining and beneficiation technology changes were carried out to adapt to ore changes, and ore processing capacity was drastically reduced. Deep mining infrastructure projects are expected to be inspected in October 2024.
The company's production capacity expansion is progressing steadily, and Baiyin's leading advantage continues to be consolidated.
The company currently holds 7 mining companies with silver reserves of nearly 10,000 tons, and has built a mining capacity of nearly 2 million tons/year. Of these, 4 mines are in production and 3 are under construction. Among them, Dongsheng Mining, Deyun Mining, and Honglin Mining are under construction, which will contribute more to silver and gold growth in the future. Dongsheng Mining has obtained a mining license of 250,000 tons/year and is carrying out preliminary construction work; Deyun Mining obtained a mining license in February 2024, with a load scale of 900,000 tons/year, and the project is in the early construction preparation stage; Honglin Mining has a certified load scale of 396,000 tons/year and is carrying out mine construction work.
Outreach mergers and acquisitions, up-and-comers in gold rise to prominence
The company carries out epitaxial mergers and acquisitions for precious metals in accordance with the strategic plan, and strives to complete one merger and acquisition every year. In 2023, the company obtained 53% of Honglin Mining's shares in the form of a cash capital increase and included Honglin Mining in the scope of the company's consolidated statements. The Caiyuanzi Copper and Gold Mine identified a total of 6.056 million tons of ore, 17.05 tons of gold metal, an average grade of 2.82 g/t, and 29,000 tons of copper metal resources, with an average grade of 0.48%. Mine production includes gold and copper, with a mining depth of 3162-2202 meters. Currently, the Caiyuanzi copper-gold mine construction project has been approved for temporary use of land, the local emergency administration has approved the application to start the tailings mine, and Honglin Mining has basically met the conditions to start construction.
Profit forecast: With the rise in silver prices and the successive commissioning of the mines under construction, the company is expected to see a sharp rise in volume and price. We expect the company's revenue to 2024-2026 to be 20.45/27.25/3.383 billion yuan, respectively, and net profit to mother will be 3.70/5.80/738 million yuan, respectively. Corresponding to the current stock price PE is 24/15/12 times, respectively, giving a purchase rating.
Risk warning: 1. The company's production growth depends on new mine construction or technical reform in Dongsheng, Jinshan, Deyun, and Honglin, but mine construction faces uncertainties from various aspects such as policy, environmental protection, natural conditions, and human factors, so the construction and commissioning of mining projects may be delayed; 2. Production in production mines is affected by various aspects such as production time and ore grade. If production time is shortened due to natural factors or policy factors, or ore quality declines, the production of mining production is affected; 3. Precious metals prices are affected by the monetary and economic policies of the Federal Reserve at home and abroad The situation, industrial demand, etc. have a lot of influence, if only the US If the Federal Reserve cuts interest rates lower than expected, the price may exist; 4. The impact of Jinshan Mining's technical reforms on production exceeded expectations, and the technical reform period exceeded expectations. 5. The company recently received a letter of civil settlement and reached a settlement on the dispute over the merger and acquisition of Guizhou Dingshengxin Mining. The defendant will return the deposit to Shengda Resources in three installments, but there is still uncertainty about the execution of the mediation.