The company released three quarterly reports: Q3 achieved revenue of 3.504 billion yuan (yoy +4.82%, qoq -5.96%) and net profit of 0.688 billion yuan (yoy -18.49%, qoq -21.26%). Q1-Q3 2024 achieved revenue of 10.097 billion yuan (yoy +14.06%), net profit to mother of 2.195 billion yuan (yoy -6.07%), deducting non-net profit of 2.176 billion yuan (yoy -6.13%). We believe that the molybdenum industry has a rigid supply and high demand boom; the company is a leader in the molybdenum industry chain and is rich in resources, and is expected to fully benefit from rising molybdenum prices in the medium term and maintain an “gain” rating.

Third-quarter results are under month-on-month pressure

Over the past 24 years, strong demand for molybdenum caused molybdenum prices to restart and fluctuate at a high level in the third quarter.

According to My Steel, the country's key premium steel companies had a cumulative steel output of 30.14 million tons in January-September, an increase of 11% over the previous year; according to Tungsten-Molybdenum Yunshang, the cumulative production of ferromolybdenum from January to September '24 was +24% year-on-year. From the perspective of average quarterly prices, according to Wind, the price of 24Q3 molybdenum concentrate (45-50%) rose slightly by 0.56% month-on-month to 3,685 yuan/ton. However, in 24Q3, the company's revenue fell 5.96%, and gross margin fell 0.55pct to 38.61% month-on-month, which deviated from the trend of molybdenum prices, probably due to seasonal fluctuations in the raw material self-sufficiency rate for molybdenum products.

Expenses increased month-on-month during the superposition period, and net profit ultimately fell 21.26% month-on-month.

Molybdenum industry chain leader, rich resources

The company is an industry-leading supplier of molybdenum products. It is mainly engaged in the production, sales, research and development of molybdenum series products and the trade and operation of molybdenum related products. It produces three series of high-quality products: molybdenum furnace materials, molybdenum chemicals, and molybdenum metal deep processing. In 23 years, it has produced 15146, 6213, and 4947 tons of molybdenum powder, respectively. In terms of resources, the company operates two large-scale open-pit molybdenum mines. Among them, the Jinduicheng Molybdenum Mine is one of the six largest native molybdenum mines in the world. The product quality is particularly suitable for deep processing. It has 0.451 billion tons of ore resources, an average grade of 0.083%, and a service life of 34 years; the Ruyang Donggou Molybdenum Mine has 0.462 billion tons of resources, an average grade of 0.120%, and a service life of 56 years. In addition, the company also shares in the Shapinggou Molybdenum Mine and the Jide Molybdenum Mine.

Give a target price of 13.82 yuan

We maintain our profit forecast. We expect the company's net profit to be 31.19, 31.35, and 3.155 billion yuan for 24-26, with year-on-year growth rates of 0.63%, 0.52%, and 0.62%, respectively, and corresponding EPS of 0.97, 0.97, and 0.98 yuan. Comparable's 25-year average PE valuation is 12.37X. Considering that Comparable's share of molybdenum profits gradually shrinks as production of other varieties expands; however, the company is a leader in the molybdenum industry chain and is more likely to fully benefit from the rise in molybdenum prices. Therefore, the company was given a 25-year PE valuation of 14.22X, and the estimated target price was 13.82 yuan.

Risk warning: downstream demand for molybdenum fell short of expectations, and molybdenum supply exceeded expectations.