The company's recent situation

According to an announcement on the evening of December 10, the company signed an “Equity Cooperation Agreement” with Australian Terra Mining and its shareholder DAI RUI to purchase 51% of Australia's Terra Mining shares for 1 Australian dollar.

Terra Mining is mainly engaged in open pit mining drilling, blasting, loading, transportation, crushing, and mining design and development.

reviews

Terra Mining's transaction consideration is low, and Jin Chengxin will bear bad debt losses on its trade receivables. According to the announcement, Terra Mining's share transfer is mainly due to its tight financial situation. The Istanbul Xinshan magnetite project it operates uses an overall escrow operation model. Due to the large upfront capital investment, long capital settlement period, and failure to recover sales due to customer reasons, it has now basically fully accrued bad debts. Terra Mining's net profit for 2024 (the Australian fiscal year is July 1 to June 30) was -8.6421 million Australian dollars, and net assets were -1.5859 million Australian dollars.

Kim Sung-shin can provide Terra Mining with its funding needs and help recover its arrears through legal means. According to the announcement, on the one hand, Terra Mining's capital requirements can be funded by itself, and in addition, priority shareholder loans can be provided through Jin Chengxin; at the same time, for accounts receivable that have already been calculated for bad debts, Jin Chengxin plans to help it recover its arrears and reduce losses through legal means.

Terra Mining and Jin Chengxin's mining services business complement each other's advantages, and it is expected to become a platform for Jin Chengxin's mining services business to become international. Terra Mining is a mining service company registered in Australia. It has more than 20 years of experience in mining services in Australia and has a diverse professional management team. We believe that, on the one hand, TerraMining and Jin Chengxin have significant advantages in the field of open pit and underground mining services, respectively. In the future, they can complement their strengths and exert synergy effects, which is conducive to further expanding the company's business chain; on the other hand, this merger and acquisition provides a platform and opportunity for Jin Chengxin to enter the overseas mining services market in developed regions such as Australia, and can also enhance the company's international management level.

Overall, as a leader in integrated mine operation and integrated operation services, Jin Chengxin's “mining service+resources” strategy has achieved landmark development, and the allocation value is prominent. Looking at the mining services sector, the company has achieved “two markets” at home and abroad. We believe that this merger and acquisition is expected to further accelerate the pace of internationalization of the company's mining services and help accelerate the internationalization of the resource sector. Looking at the resources sector, the company's “mining service+resources” strategy has driven the company's comprehensive transformation from a single mine development service enterprise to a group mining company. We believe that with the gradual release of the company's copper production, the company's performance is expected to accelerate growth.

Profit forecasting and valuation

We remain unchanged in our 2024/2025 earnings forecast. The current A-share price corresponds to 2024/2025 17/13x P/E. Maintaining an outperforming industry rating and maintaining a target price of 57 yuan, corresponding to 2024/2025 23/18x P/E, with 39% upside compared to the current stock price.

risks

Product prices fluctuate greatly, project delivery falls short of expectations, and geopolitical risks in countries hosting overseas projects.