occurrences

On August 22, the company released its 2024 semi-annual report: 2024H1 achieved revenue of 6.593 billion yuan, +19.66% year over year; net profit to mother was 1.507 billion yuan, +0.95% year over year.

2Q2024 revenue was 3.726 billion yuan, +29.97% month-on-month, +30.02% year-on-year; net profit to mother was 0.874 billion yuan, +37.98% month-on-month and +32.36% year-on-year.

reviews

The performance exceeded expectations, making it the highest profit in a single quarter in nearly 10 years: The reason why the Q2 performance exceeded expectations was due to a sharp rise in volume and price. 24Q2 molybdenum concentrate and ferromolybdenum prices were +10% and +8% month-on-month to 3,653 yuan/ton and 234,700 yuan/ton, respectively. Considering the impact of the Q1 seasonal off-season, the Q2 company experienced a sharp rise in volume and price, and the company's Q2 performance exceeded expectations.

Management improvements continue to advance, and the capital structure remains good. The company's rate for the 2Q24 period was -1.28pct to 4.37%; among them, sales expenses and management expenses all declined, -28.57% and -0.88% month-on-month to 0.05 million yuan and 112 million yuan, respectively. The company continued to maintain a high investment in R&D, with 2Q24 R&D expenses +13.21% month-on-month to 0.06 billion yuan. The company's 24H1 balance ratio is 14.76%, which is still at a low level.

The molybdenum metal processing sector is growing rapidly, which is beneficial to the company's overall profitability. The company produced 2024H1 molybdenum metal products +55.86% year-on-year, and sold 160 tons of molybdenum metal products; we believe that as the company continues to expand new products and customer development, gradually increasing the sales scale of processed products will help gradually increase the company's overall profitability.

Forge ahead and target 0.1 million tons of molybdenum concentrate. The company's current production capacity of molybdenum concentrate (45%) is 0.05 million tons/year, and the target for 2024 is 0.0515 million tons. 2024H1 has completed 52.9% of the annual sales plan for its own products, “striving to reach 0.1 million tons of molybdenum concentrate within 5 years.”

Focus on return on investment. In 2021-2023, the company distributed a total cash dividend of 2.582 billion yuan, with an average dividend ratio of 52.38%; of these, cash dividends paid in 2023 were 1.291 billion yuan, with a dividend ratio of 41.64%. In 2024, the company will insist on implementing a continuous cash dividend policy on the premise of complying with relevant laws and regulations and the “Articles of Association”.

Pay attention to the “gold nine silver ten” market for molybdenum. According to statistics from Molybdenum Trade Network, the amount of 2024H1 steel was +30% compared to the same period; the total amount of molybdenum iron steel recruitment exceeded 10,000 tons on August 22, which has already exceeded the level of steel recruitment for the whole month of August last year. As steel procurement data continues to be booming, the current concentrate inventory level is -28% compared to the same period last year. Following the arrival of the “gold nine silver ten” peak season, we believe that the molybdenum industry chain is expected to accelerate to a lower level, and molybdenum prices are expected to welcome an upward cycle due to tight raw materials.

Profit Forecasts, Valuations, and Ratings

The company's revenue for 2024-2026 is estimated to be 13.2/14.1/15.1 billion yuan, and the net profit due to mother is 3.6/4/4.2 billion yuan, EPS is 1.10/1.23/1.31 yuan, respectively, and the corresponding PE is 8.74/7.85/7.37 times, respectively. Maintain a “buy” rating.

Risk warning

Product price fluctuation risk; safety and environmental management risk; element substitution risk.