The company released three quarterly reports: The decline in production and changes in fair value had a certain impact on the company's performance. According to the financial report, Q3 achieved revenue of 21.232 billion yuan (yoy +52.77%, qoq -20.82%) and net profit of 0.682 billion yuan (yoy +46.62%, qoq -0.18%), which is in line with the expectations of the previous company announcement. Q1-Q3 2024 achieved revenue of 67.006 billion yuan (yoy +62.15%), net profit to mother 2.066 billion yuan (yoy +53.57%), deducting non-net profit of 2.094 billion yuan (yoy +63.57%). The company is speeding up the construction of a world-class gold production base. We believe that gold prices will still have room to rise in the long term, and that gold stocks still have allocation value and maintain an increase rating.

Q3 self-produced gold production declined slightly month-on-month. Net income from changes in fair value affected performance. According to the three-quarter report, the company's Q1-3 self-produced gold production was 35.44 tons, yoy +19.58%; outsourced gold production was 59.27 tons, yoy +43.15%; small gold bar production was 17.90 tons, yoy -19.53%. Among them, self-produced gold production in Q1/Q2/Q3 was 11.91/12.61/10.92 tons, respectively, and Q3 production declined slightly from month to month. In addition, the Q3 company's net profit from changes in fair value was -0.288 billion yuan, which also affected Q3's performance.

Continued integration of mineral rights to accelerate the construction of world-class gold production bases

The Dongfeng mining area and the Lingshan mining area, which belong to the Linglong Gold Mine, are currently in a normal state of production. The Linglong mining area has now obtained a production safety license and is applying for a blasting operation unit license, and production can resume after obtaining it.

As the core mining area of the company's Laizhou gold production base, the Jiaojia Gold Mine has now been integrated and has successfully obtained a 6.6 million tons/year mining license. In order to speed up the construction of a world-class gold production base, the Jiaojia Gold Mine will expand the construction of reproduction projects and safety facilities in 2024. The scale of production capacity will be adjusted appropriately during this period, which may have a certain impact on the company's current production and operation indicators.

The price of gold still has room to rise for a long time. Gold stocks still have allocation value. Recently, US election transactions have gradually heated up. Trump's winning rate has increased rapidly, US 5y break-even inflation expectations have risen rapidly, and concerns about secondary inflation have heated up the geopolitical situation, and the price of gold has once again reached a record high. As the US election approaches and the intensive release of US economic data in early November, the price of gold may continue to fluctuate strongly at a high level in the short term. Although the price of gold is relatively adequate for the monetary policy side of the Federal Reserve, the probability that the US fiscal side exceeds expectations is clearly increasing along with the rise in Trump's winning rate, compounded by the acceleration of anti-globalization. We believe that the price of gold still has room to rise in the long term, and gold stocks still have allocation value.

Maintain an increase in holdings rating

Based on assumptions such as net income from fair value changes in the three-quarter report, we expect EPS of 0.73/1.05/1.46 yuan for 24-26, respectively (previous value of 0.91/1.37/1.64 yuan). Comparatively, the company's 25-year Wind agreed to expect an average PB value of 3.03 times. Considering the company's continuous expansion of production, the company was given 3.64 times PB in 25 years, and the average A/H premium rate for the past 3 months was 88%, based on the HKD/RMB exchange rate of 0.917 on October 28, 24, corresponding a target price of $32.36 for A-shares (previous value of HK$31.66), and the target price for H shares was HK$18.77 (previous value HK$20.39), maintaining an increase rating.

Risk warning: Downstream demand in the industry falls short of expectations, the Federal Reserve's interest rate cuts fall short of expectations, etc.