Key points of investment
Guangxi Huaxi Nonferrous Metals Co., Ltd. (“Huaxi Nonferrous Metals” for short) is a listed company controlled by Guangxi Beibu Gulf International Port Group Co., Ltd., a large state-owned enterprise. The company is the main domestic producer and service provider of tin, antimony, zinc, indium, lead and silver metals, and is also the only state-owned listed company in the non-ferrous metals industry in Guangxi. Currently, the company has two mines: Gaofeng Mine (the company's shareholding ratio is 58.75%) and Tongkeng Mine.
At present, production from the two main mines, Gaofeng and Tongkeng, has been released steadily
In 2023, the company's tin concentrate (including low tin) production was 6,500.19 metal tons, up 22.91% year on year; zinc concentrate production was 35,900.09 metal tons, up 32.69% year on year; lead and antimony concentrate production was 14,123.23 metal tons, up 22.69% year on year. The company's tin concentrate and zinc concentrate mainly commissioned the processing of tin ingots and zinc ingots.
Incremental projects: internal improvement+external injection of Buddha and Five Lucky
Internal upgrading projects: the 3,000-ton daily mining project for the Tongkeng Zinc Polymetallic Mine, the No. 105 ore body project, and possible mine upgrading projects in Gaofeng Mining.
External injection: According to the controlling shareholders' promises, Fozi Mining and Hechi Wuji are expected to be incorporated into listed companies in the next few years.
Tin: Recovery in demand+limited production is expected to remain strong
There is a clear upward trend in the long-term center: tin prices are closely related to external factors such as macroeconomic expectations and the semiconductor cycle. Reviewing tin prices since 1990, we find that there is a clear trend of long-term upward trend in tin prices.
Demand side: A new semiconductor cycle is expected to resume, driving tin prices into a strong range: semiconductor sales bottomed out in the first and second quarters of 2023, with a significant year-on-year contraction. The year-on-year upward trend in semiconductor sales since 2024 is clear, which is expected to drive a recovery in demand.
As for the stock market, China's total tin ingot inventory is currently around 17,000 tons, which is a slight decline from the previous high.
We believe that high tin prices in the early stages caused more downstream enterprises to maintain a low inventory production model with on-demand procurement. Later demand for inventory replenishment will drive inventory removal and continuous improvement in apparent demand, and support the continued strength of tin prices.
Profit forecasting and valuation
We expect the company's revenue for 2024-2026 to be 42.24/52.43/5.981 billion yuan, respectively, +44.47%/+24.14%/+14.07% year-on-year, and 2024-2026 net profit to mother of 585/7.00/888 million yuan, respectively, +86.53%/+19.67%/+22.56% year-on-year, and EPS of 0.92/1.11/1.36 yuan, respectively. Based on the company's industry status, future business growth, and comparable company valuations, we gave the company 25 times PE in 2023. The corresponding company's stock price was 23 yuan/share, which covered the company's “buy” rating for the first time.
Risk warning
The relevant asset injection schedule fell short of expectations, downstream demand for metals fell short of expectations, and there was a risk of disturbances in tin supply in some regions.