Event: a survey of gold and lead in Yuguang was conducted on June 21.

Main points of investment:

The management briefly introduced the company: the company was listed on the Shanghai Stock Exchange in July 2002. at present, the main products are: 410000 tons of lead (about 10% of the country's total output), 8 tons of gold, 1000 tons of silver, 570000 tons of sulfuric acid, 100000 tons of copper, and small metals such as antimony and bismuth. In the first quarter of 2019, under the influence of the Sino-US trade war, metal prices declined all the way, which had a certain impact on the company's performance, but the company took various measures, and the overall operation of the company was relatively stable. In recent years, the main idea of the company's operation is to "take the development road of circular economy". It used to rely on lead ore to smelt lead, gold and silver. In 2016, the company raised 1.5 billion yuan from the capital market to establish a circular economy. We have set up points throughout the country to recycle waste batteries and make full use of "urban mines". It has also developed well in recent years. At present, a large part of the 410000 tons of lead is recycled lead, and recycled lead enjoys national tax rebate support. In terms of raw materials, the company will comprehensively consider whether to buy primary ore or waste storage battery according to different situations. if the benefit of using waste lead-acid battery production is good, the company will buy a large number of waste lead-acid battery production. However, the recent purchase of waste lead-acid batteries is not cost-effective, because copper, zinc, bismuth and sulfur are not priced except lead, gold and silver, the main products of primary ore. Now it is more cost-effective to buy primary ore. The company also has part of its export business, and the Sino-US trade war does have an impact on the company, but it is mainly the impact of the trade war on the price of non-ferrous metals, and the sharp decline in the price of non-ferrous metals has a negative impact on the company's efficiency. The company mainly focuses on smelting and basically does not have its own mines, and mainly earns processing fees. in order to avoid the impact of metal price fluctuations on the company's performance, the company hedging in the futures market to maintain the stability of processing fees, from the current hedging situation, the income is not bad.

The company plans in the near future: (1) relocate the project, carry on the technical transformation of the original lead smelting system, improve the technical equipment, and the production cost of lead will be reduced to a certain extent after the relocation is put into production; (2) pay attention to internal management and improve labor productivity. Reduce costs and grasp comprehensive recovery. All this work is being carried out in an orderly way and there will be a good development in 2019.

Question1: why does the company increase its income but not its profits in recent years? Answer: the company is a smelting enterprise, raw materials should be purchased, and the company mainly earns processing fees. In recent years, the output of the company has not increased much, and the increase in revenue is mainly caused by the rise in metal prices. In recent years, environmental protection has been strengthened, small mines and non-compliant mines have been shut down, and the supply of raw materials has been tight, resulting in a large increase in the price of primary ore, a substantial increase in the cost of purchasing primary ore, and a thinning profit space for processing fees of smelting enterprises.

Question 2: if the price of precious metals is relatively good recently, what is the impact on the company? Answer: in terms of total revenue, the company is lead 1/3, precious metals (gold, silver) 1/3, copper 1/3. Because the raw materials are associated with gold, silver, copper and other metals, the price of precious metals is good, the company tends to purchase more primary ores with high precious metal content.

Question 3: the new national standard for electric bicycles requires that the quality of the whole vehicle (including batteries) should not exceed 55 kilograms. Will there be lithium electrification of electric bicycles, resulting in a sharp decline in downstream demand? Answer: there are three kinds of power batteries: lithium battery, fuel cell and lead-acid battery. Low-speed electric vehicles are mainly lead-acid batteries. The national support for lithium batteries is very strong, but lithium batteries are flammable and explosive. Environmental recycling of lithium batteries will also be a big problem in the future. Some experts believe that the cost of recycling may be higher than that of making new batteries. Lithium batteries are only used for battery life, but lead-acid batteries are mainly used for start-up and lighting. As for the mass limit of 55 kg of electric bicycles, in fact, the manufacturing technology of lead-acid batteries is also making continuous progress, which can basically meet this standard, but the impact is actually not very great. In fact, the company's lead is mainly used in the manufacture of lead-acid batteries for cars. "Yuguang" brand lead has a very good reputation in the industry. Although car sales have declined this year, there is a huge number of cars in China, and there is still a great demand for battery replacement every year.

Question 4 what is the main reason for the slow progress of the recycled lead recycling project, which raised 1.5 billion yuan in 2016? Answer: due to environmental protection, taxation and other reasons, the construction of recycling outlets for waste lead-acid batteries is relatively slow, but the company's output of recycled lead has been growing, and is growing rapidly, and the proportion of recycled lead production has increased from 10% to 50%. The slow progress of network construction is mainly affected by two aspects: (1) changes in national industrial policy, waste lead-acid batteries as hazardous waste, the company originally expected to be strictly in accordance with hazardous waste management, but later the country implemented the extended producer responsibility system, the standards have been relaxed, if you continue to build recycling outlets, it may lead to a large investment but not necessarily good returns. (2) in terms of taxation, the tax chains of recovery and disposal are different, and if recycling points are built in other places, they may not be able to enjoy tax concessions. Of course, the company is also keeping a close eye on national policy developments, and the new solid waste law may be introduced soon, and then push forward the relevant work according to the actual situation. In the future, the new solid waste law may be inclined to regional disposal, and the company intends to lay out disposal centers in Jiangxi, Hebei and southwest regions to link regional recycling with regional disposal. In any case, the company's direction of developing recycled lead and taking the road of circular economy development will not change.

Question 5: the company has a relatively high debt ratio and increased more short-term borrowing in the first quarter. How does the company consider reducing debt and preventing debt risk? Answer: smelting is a capital-intensive industry, the debt ratio of the industry is generally high, because inventory needs to take up a lot of capital, and the company's debt ratio has hovered around 70% in recent years. In the early years, the company realized that the high debt ratio may bring risks to the operation. In 2016, the company reduced the company's debt ratio by issuing additional shares to raise capital and replenish liquidity. In the past two years, the company has also actively grasped the intermediate occupation, pressing down the intermediate occupation as much as possible and reducing bank loans. In addition, it can increase owners' equity and reduce debt ratio by increasing profits. Some of the work to reduce the debt ratio is moving forward steadily.

Question 6: the important risk in gold and lead smelting is environmental protection. How to deal with the company's tail water, tailings and tail gas? Is there an environmental risk? Answer: environmental protection is the lifeline of an enterprise. In recent years, the company has done a lot of work, in terms of wastewater, domestic wastewater is used for the greening of the factory area through the integration project, acid wastewater is returned to use after passing through the sewage treatment station, and other wastewater is treated in the reclaimed water station. the external drainage basically meets the standard of drinking water. In terms of waste gas, the company's waste gas is mainly used to produce sulfuric acid and liquid sulfur dioxide, which reached the special emission standard through special transformation last year. For example, sulfur dioxide was 250 μ g / m3, now 100 μ g / m3, nitrogen oxide 240 μ g / m3, now 100 μ g / m3, and particulate matter 30 μ g / m3, now 10 μ g / m3. In terms of solid waste, on the one hand, source reduction is adopted, such as nearly 10,000 cubic meters of waste acid, which is now all used for the leaching of zinc oxide; gypsum residue produced by sulphuric acid plants is used in proportioning; and some other waste residues are put into cement plants. In 2018, the company invested more than 100 million yuan to transform equipment and reduce emissions.

Question 7: what is the company's recovery of a small amount of elements such as bismuth and palladium? Answer: Palladium has just started this year, with nearly 40 kilograms of palladium recovered and 360000 yuan per kilogram of palladium. The company is promoting vacuum melting to improve the recovery of bismuth, antimony and other small metals and increase by-product revenue.

Risk tips: (1) prices of metals such as lead and gold fall; (2) downstream demand for lead-acid batteries