Core views:

Benefiting from the rise in molybdenum prices, 24Q2 performance increased significantly year-on-month. According to the 2024 semi-annual results report of Gold and Molybdenum Co., Ltd., 24H1's revenue and net profit to mother were about 6.59 and 1.5 billion yuan respectively, up 19.66% and 0.59% year-on-year respectively. It is estimated that 24Q2 revenue and net profit to mother were about 3.73 and 0.87 billion yuan respectively, and 24Q2 net profit to mother grew by more than 30% year on month. According to iFind data, the average price of molybdenum in 24Q1 and Q2 (Henan: 45%-50% molybdenum concentrate) was about 0.333 and 0.365 million yuan/ton respectively. On July 12, it was 0.37 million yuan/ton. The contradiction between supply and demand in the industrial chain gradually became apparent.

I am optimistic about long-term continuous and stable high percentage dividends. According to Wind data, the company maintained a high percentage of dividends as a whole until 2023, with a cumulative cash dividend of 9 billion yuan, and an overall average dividend rate of about 75%.

The total dividend for 23 years was 1.29 billion yuan, with a dividend rate of 41.6%, estimated at the closing price of July 1, 2024, corresponding to a dividend rate of 3.6%.

Molybdenum supply restrictions are expected to promote a steady rise in molybdenum prices: global molybdenum supply is expected to increase by about 2% to 3% in 24-26, and the aging of mines poses a major challenge to molybdenum supply. According to IMOA, companies' annual reports and production and operation announcements, we estimate that global molybdenum production in 24-26 will be 0.29, 0.3, and 0.31 million tons, respectively, +2.1%, +2.4%, and +3.2% compared with the same period last year. Due to the deepening depth of copper mining in South America and the gradual decline in grade, the aging of mines poses a great challenge to the supply of molybdenum.

Profit forecasting and investment advice: Maintaining the company's “buy” rating. The company is expected to achieve EPS of 1.13/1.21/1.26 yuan/share in 24-26, the PE corresponding to the closing price on July 12, 24 is 10/9/9 times, and the average PE value of the company since the beginning of '22 is 14.6 times. The company is a leader in the molybdenum industry. Considering that the company has benefited from the long-term rise in molybdenum prices, referring to comparable company valuations and the company's historical valuation center, we maintain the judgment that the company's reasonable value is 14.65 yuan/share, corresponding to the company's PE valuation 13 times over 24 years, and maintain the company's “buy” rating.

Risk warning. Stricter environmental standards have disrupted mine production or increased costs; trade protection may cause a decline in global economic growth to affect molybdenum demand; overseas copper-molybdenum companion mines may rapidly increase molybdenum supply by using molybdenum-rich and copper-poor copper mining methods, leading to a drop in prices.