Jinchuan International is the flagship platform for Jinchuan Group to develop overseas resources. The company has large-scale high-quality copper and cobalt metal resources mines in Africa, vigorously building transnational mining development and operation business, mainly engaged in copper and cobalt resources production and trade. By the end of 2020, the company operates three mine projects: Ruashi, Chibuluma South Mine and Kinsenda Mine, and two development and exploration projects are Musonoi and Lubembe.
With the group's high-quality copper and cobalt resources, growth can be expected. 1) the company is rich in resources. As of December 31, 2020, it has a total of 196.2 million tons of ore resources, 4.64 million tons of copper resources and 447000 tons of cobalt. 2) Jinchuan Group, the major shareholder of the company, is the third largest nickel producer in the world and the third largest copper producer in China. 3) growth can be expected, the company currently has a cobalt production capacity of 6000 tons + copper more than 70, 000 tons, in the development project Musonoi can contribute 7800 tons of cobalt + 38000 tons of copper, after the completion of 2022, the company's total production capacity will reach 13000 tons of cobalt + 110000 tons of copper. The long-term goal is to achieve the production of 60,000 tons of nickel per year, 200,000 tons of copper and 12000 tons of cobalt per year.
Industry level: 1) Cobalt, the growth of the "J" curve of the global electric vehicle market, the resonance of the three major markets in China, the United States and Europe, and the permeability is expected to accelerate, and cobalt-free is more of a medium-and long-term proposition. The impact of new energy vehicles on the demand side is still mainly driven by the total amount, there is no new production of large mines on the supply side in the short term, and the upward direction of cobalt prices remains unchanged. 2) Copper, the short-term global economy is still in a period of recovery, we expect copper prices to remain high, copper supply will peak in 2023, photovoltaic, new energy vehicles, wind power and other emerging areas of copper demand pull obvious, copper supply and demand tight balance.
Investment advice: low-cost copper and cobalt resource-based companies, high flexibility, high growth, coverage for the first time, given "overweight" rating. 1) High growth: the company's copper C1 cash cost is in the top 50% of the industry, the cost is highly competitive, the reserve project is rich, and the mine under construction is about to be put into production. 2) High elasticity: in terms of performance elasticity, for every $1000 increase in copper prices, the company's 21-year performance increases by about $30 million. 3) performance forecast: according to the mine production planning of Musonoi and Lubembe, it is assumed that the copper sales volume from 2021 to 2023 is 71000, 73000 and 82400 tons respectively, and the cobalt production is 5000, 5000 and 7310 tons respectively; based on the supply and demand structure of copper and cobalt, the copper prices are 9000, 8000 and 9000USD / ton respectively from 21 to 23, and the cobalt prices are 20,22,25 US dollars / lb. According to this estimate, the company is expected to achieve a net profit of $1.55,1.32 and $234 million belonging to shareholders of listed companies from 2021 to 2023. 4) comparable company valuation: the company's 21-year PE is 12.86X (comparable company PE is 10.29X), and the current PB is 2.18X, which is 2.45 times lower than the average PB of overseas copper and cobalt resources companies.
Risk tips: price fluctuations of the main products, project progress falling short of expectations, deviation in demand measurement and the risk of lagging behind in the use of public information.
