Rapid performance growth: The company achieved sales revenue of 8.424 billion yuan (same below) in 2023, up 6.82% from last year; achieved gross profit of 3.37 billion yuan, up 26.90% year on year; gross margin was 40.1%, up 6.33 percentage points year on year; realized net profit to mother of 686 million yuan, up 70.77% year on year, and achieved significant growth in performance. In 2023, the company completed 24.68 tons of gold production, a year-on-year decrease of 9.75%; of these, it achieved 17.58 tons of mineral gold, a year-on-year decrease of 8.63%, and 7.11 tons of smelting and processing gold, a year-on-year decrease of 12.39%. The decline in mineral gold production was mainly due to a reduction in company buyout funds.

The future of the offshore gold mine can be expected: the offshore gold mine officially began construction after obtaining a mining license in July 2019. Up to now, the offshore gold mine project is still in the project construction stage. According to the project plan, the offshore gold mine will be initially completed in 2025. The project uses underground mining, and it is proposed to use a process of coarse crushing - semi-self-grinding, hard stone crushing - flotation. The recovery rate of mineral processing is expected to reach 97%. The extraction scale is 3.96 million tons of ore/year, and the total investment of the project is about 6 billion yuan. After overall production is completed, the offshore gold mine is expected to produce 15-20 tons of mineral gold per year.

The successful acquisition of Tietuo Mining led to a further increase in resource reserves: On June 6, the Australian Stock Exchange issued an announcement stating that Tietuo Mining will be delisted from the official list of the Australian Stock Exchange when the transaction ends on the same day. This marks the smooth implementation of Zhaojin Mining's comprehensive offer to acquire Tietuo Mining. Its flagship asset is the Abuja gold mine in Côte d'Ivoire, West Africa. The gold mine is expected to become one of the 20 largest gold mines in West Africa, an important gold producing region in the world. It has 1,114 square kilometers of mineral rights, 1.36 million ounces of gold reserves, and 3.83 million ounces of resources. Currently, the exploration area is less than 10%, and the prospects for future exploration are huge. The Abuja gold mine reached production in July 2023, and the full year of 2023 production was about 94,000 ounces, which also indicates a further increase in the company's resource reserves.

We are optimistic about the company's future development. The target price is HK$17.46, which covers and gives a buying rating for the first time: we forecast that the company's revenue for 2024-2026 will be RMB 10.320 billion, RMB 13.090 billion, and RMB 15.766 billion, respectively, and net profit attributable to the parent company will be RMB 1,058 billion, RMB 1,697 billion and RMB 2,137 billion, respectively. Based on the high price of gold and the continued release of the company's future gold production capacity, we gave the company a target price of HK$17.46 for the next 12 months, corresponding to the 35 times PE valuation center in 2025. There is room for an increase of 27.60% compared to the current price. We covered it for the first time and gave it a purchase rating.

Risk factors: Fluctuating gold prices, mine construction falling short of expectations, delays in the timing of the Fed's interest rate cut