Core views:

Q2 net profit to mother increased 149% to 169% month-on-month, and earnings exceeded expectations. The company announced its semi-annual results forecast. In 24Q2, the company expects to achieve net profit of 0.499 billion yuan to 0.539 billion yuan, an increase of 111% to 128% year on year and 149% month on month; net profit without return to mother is 0.425 billion yuan to 0.465 billion yuan, an increase of 77% to 93% year on year, and 108% to 127% month on month. The performance exceeded our expectations, mainly due to: (1) the company's cost reduction was effective, and production costs were controlled; (2) the transfer of shares corresponding to Tetuo by the subsidiary, Red Gold (Hong Kong), affected the profit and loss of the current period by about 78.4393 million yuan (RMB); (3) the increase in mineral gold production, while the price of gold rose month-on-month. According to Wind, the average price of 24Q2 COMEX gold was 2350.1 US dollars/ounce, up 18.2% year on year, up 13.0% month on month. The average price of SHFE gold was 555.33 yuan/gram. 13.3%

Benefiting from the high price of gold, I am optimistic about the release of the highly elastic α standard. According to our “24-year Mid-Term Strategy for Metals and New Metal Materials: All Flowers Can Still Be Expected” released on July 5, the upward momentum in gold prices is strong in anticipation of the Federal Reserve's interest rate cuts, and the company's performance (Kirkley profit) elasticity is far higher than the elasticity of gold prices. In anticipation of improved management+volume growth, we continue to be optimistic about the company's ability to release performance.

Profit forecasting and investment advice. In 24/25/26, the company's net profit is expected to be 1.76/1.9/2.03 billion yuan, respectively, up 118.5%/8.0%/7.0% year-on-year, and the corresponding EPS is 1.06/1.14/1.22 yuan/share, respectively. According to the latest closing price, the corresponding PE is 18.5/17.1/16.0 times, respectively. Volume and price have risen sharply, and the company's performance is expected to continue to be highly flexible. Referring to comparable company valuations, we think it is reasonable to give the company a 24-year 28 PE valuation. The reasonable value of the corresponding company's A shares is 29.56 yuan/share, maintaining the company's “buy” rating.

Risk warning. The risk of gold price fluctuations due to changes in expectations of the Federal Reserve's interest rate cuts; the risk of exchange losses due to exchange rate fluctuations; the risk of rising costs caused by deep mining, natural disasters, etc.; and the risk that production growth falls short of expectations.