Net profit in the first three quarters decreased compared with the same period last year.

In the first three quarters of 2016, the company achieved operating income of 432 million yuan, down 34.13% from the same period last year; net profit belonging to the parent company was 13 million yuan, down 21.30% from the same period last year; and basic earnings per share was 0.03 yuan, down 25.87% from the same period last year.

Of this total, the operating income in the third quarter was 157 million yuan, down 33.88 percent from the same period last year, up 89.16 percent from the previous quarter; the net profit belonging to the parent company was 2 million yuan, down 54.23 percent from the same period last year, an increase of 15 million yuan over the second quarter and reversing losses from the previous quarter.

The company's performance is in line with market expectations.

The output of chromium and copper decreased for the whole year, and the performance in the fourth quarter is expected to improve month-on-month.

Due to low previous prices, the company reduced its planned production of chromium, copper and other products at the beginning of 2016, resulting in a sharp drop in revenue during the reporting period compared with the same period last year. In the first half of the year, the company's chromite output was only 21.8% of that of last year, product revenue decreased by 70.9% compared with the same period last year, and electrolytic copper business revenue decreased by 98.8% compared with the same period last year. Since September, the price of chromite ferrochrome has continued to rise. By the end of October, the price of chromite has risen by more than 90% compared with the beginning of the year, and the average price is expected to rise month-on-month by the end of the year. The company has a large inventory of mining products in 2015, and the profit situation in the fourth quarter is more likely to improve on the basis of higher prices.

Lithium carbonate production process is advanced, with room for performance growth.

The company has rich reserves of high-quality salt lake resources, but affected by the plateau environment, the progress of pre-development is slow. At present, the company has a production capacity of 8626 tons of lithium carbonate concentrate per year, and the concentrate production capacity will be increased by more than 10, 000 tons after the completion of the second phase of the project; at the same time, the 1000 tons / year battery-grade lithium carbonate test production line is in stable operation, and the subsequent demonstration will continue. At present, the price of lithium carbonate is still high, and the company is expected to give full play to its resource advantages and achieve long-term performance growth after technological breakthroughs.

Successful acquisition of chromium ore resources and improvement of comprehensive strength

During the reporting period, the company successfully conducted a non-public offering and completed the acquisition of chromite in the Luobusa I and II ore group. Luobusha mining area has more than 2 million tons of chromite ore resources, and it is estimated that the company will have a chromite ore capacity of 100000 tons per year after the completion of the mine construction. At present, the company has completed mining rights management and government review, with the project construction and production, it is expected that the production capacity will be gradually released by 2018. The acquisition provides the guarantee of chromium ore resources for the development of the company, and further improves the comprehensive strength of the company.

Maintain the company's "overweight" rating

The company is rich in chromium ore resources, lithium products business profitability is strong, chromium ore and lithium carbonate production capacity has room to improve, so to maintain the company's "overweight" rating. It is estimated that the company's income from 2016 to 2018 is 608 million yuan, 832 million yuan and 1.082 billion yuan respectively, and the corresponding EPS is 0.06,0.13,0.17 yuan respectively.

Risk hint: lithium carbonate prices fell; downstream demand was lower than expected.