Incident: On July 12, the company issued a performance advance announcement. 24H1 is expected to achieve net profit of 0.84-0.905 billion yuan, an increase of 534%-583%, of which Q2 is about 0.611-0.676 billion yuan, the same increase of 413%-468%, and 167%-195%; net profit after deducting non-return to mother of 0.85-0.915 billion yuan, an increase of 439%-481%, of which Q2 is about 0.622-0.687 billion yuan, an increase of 364% - 413%, an increase of 173%-201%.
Technical change+production expansion in major mines is expected to unleash high performance flexibility. 1) Yinman Mining: Since June 9, 2023, the Yinman Mining Plant has stopped production and technical reform. The beneficiation process was modified to flotation of cassiterite on the original basis. It was completed and put into use on July 10, 2023. After the technical reform of the beneficiation plant was completed, the production and sales volume of 24H1's main mineral products increased significantly compared to 23H1. Furthermore, with reference to the annual report for the year 23, the second phase of Yinman's selection and expansion work has also entered the company's planning, and it is expected that future performance flexibility will increase further. 2) Qianjinda Mining:
Affected by the construction of the second phase of the mining area in 2022, fewer ores were in stock at the end of 2022, combined with factors such as the Spring Festival holiday and delays in the resumption of work, resulting in Qianjinda Mining's insufficient ore reserves in the first quarter of 2023, and the factory stopped production in the first quarter (production resumed production in the mining area on March 20, 2023, and the factory resumed production on April 1, 2023), which failed to achieve full production. The production and sales volume of 24H1's main mineral products also increased markedly.
The Fed's interest rate cut cycle is getting closer, and silver and tin prices are expected to rise. 1) Silver: After the June CPI data was released, the market expected that the Federal Reserve would probably cut interest rates in September. The CME Federal Reserve's observation tool shows that the possibility that the Fed will cut interest rates at the September meeting rose to nearly 90%, and the Fed is expected to enter a cycle of interest rate cuts within the year, which is beneficial to the rise in silver prices. 2) Tin: Tight supply+recovery in downstream demand. Exchanges are optimistic that tin prices will rise against the backdrop of an apparent decline in inventory. In terms of demand, according to SIA data, global semiconductor sales were +16.2% year-on-year in April '24, and semiconductors may have gradually entered a recovery cycle. In terms of supply, processing fees for tin concentrate at smelters in Yunnan were lowered from 17,500 yuan/ton to 17,000 yuan/ton at the end of June '24, indicating that the supply of tin ore is tight, and recent domestic and foreign exchange inventories have declined markedly. We are optimistic that tin prices will gradually rise in the future.
Profit forecast: In 2024-2026, we expect the company's EPS to be 1.10, 1.32, and 1.45 yuan, respectively, and PE will be 13, 11, and 10 times, respectively, maintaining a “buy” rating.
Risk warning: Project progress and capacity release fall short of expectations; changes in metal prices fall short of expectations; debt restructuring plans fall short of expectations and drag down the company's operations