Introduction to this report:

The company is a leader in domestic mineral processing equipment and spare parts. It continues to benefit from the Belt and Road policy and mining overseas, and overseas business is expected to continue to expand.

Key points of investment:

Investment suggestion: The company is a leader in wear-resistant spare parts for domestic mineral processing equipment. It continues to benefit from mining operations. Overseas business is expected to continue to expand. Comprehensive PE/PB valuation will give the company a target price of 26.27 yuan, corresponding to 25.19 times PE in 2024, initial coverage, and an increase in holdings rating.

We have been deeply involved in the mineral processing equipment and spare parts market for many years, and our products are exported overseas. Mineral processing refers to the processing and purification of low-grade raw minerals. The company's products are mainly used in grinding, grading and sorting operations in mineral processing, including beneficiation equipment and rubber wear-resistant spare parts. The new polymer composite rubber material developed by the company has many advantages such as wear resistance, corrosion resistance, economy and environmental protection, and has achieved an effective replacement for traditional metal materials. At present, the company's mineral processing equipment and spare parts have been used in many large-scale non-ferrous and ferrous metal mines in China, and exported to many countries such as Mongolia, Russia, Kazakhstan, Australia, Mexico, the United States and Peru.

Mining capital expenditure has entered an upward channel, and the Belt and Road Initiative has helped mining equipment companies go overseas. The capital expenditure of world-renowned mining companies, including BHP Billiton and Rio Tinto, has gradually entered an upward channel since 2018, and the capital expenditure of major mining companies in 2023 hit a new high in recent years. Meanwhile, according to S&P Global Market Intelligence data, capital expenditure for copper exploration increased 12% year-on-year in 2023 to reach $3.12 billion, a ten-year high. At present, the new capital expenditure mainly comes from Belt and Road countries. With the help of the Belt and Road policy, domestic Chinese mines have accelerated the progress of overseas mergers and acquisitions, thereby driving domestic mining equipment companies to go overseas faster. Domestic mining machinery exports reached 4.1 billion US dollars in 2023, an increase of 23.75% over the previous year.

After spare parts, the market space exceeds 60 billion yuan, and the company binds core customers to accelerate to the world. According to our estimates, the global mineral processing spare parts market demand exceeds 60 billion yuan. The increase in the penetration rate of rubber wear-resistant spare parts is a major trend, and the market size is expected to reach 20 billion yuan. The company binds core mining customers at home and abroad and is deeply involved in the international market. The contract amount for the full year of 2023 reached 1.225 billion yuan, of which the contract amount in the international market was 0.725 billion yuan, accounting for 59.18%.

At the same time, the company accelerated the global production capacity layout and formed a layout with Shangrao in Jiangxi as the center, and based on Mongolia, Zambia, Chile, Peru and Serbia, covering major mining regions around the world. As overseas strategies continue to advance, the company's operations and performance are expected to take off.

Risk warning: Risk of overseas mine customer expansion falling short of expectations, risk of accelerated industry competition, increasing penetration rate of rubber wear-resistant spare parts falls short of expected risk