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Zijin Mining (601899) Interim Review: Low copper and zinc prices lead to performance changes Multi-mineral resource advantages Ironing cycle change

23/03/2020

Zijin Mining (601899) Interim Review: Low copper and zinc prices lead to performance changes Multi-mineral resource advantages Ironing cycle change
Event: Recently, the company announced its 2019 Interim Report. Investment points: The company’s revenue has continued to grow, and the low prices of copper and zinc have led to a decline in profits.In the first half of 2109, the company’s actual operating income was 671.98 ppm, an increase of 34 in ten years.9%; realized net profit attributable to shareholders of the parent company 18.5.3 billion, down 26 each year.64%; net profit attributable to shareholders of the parent company after deduction is 16.5.7 billion, down 30 a year.28%; budget benefit 0.08 yuan.In the second quarter of 2019, the company achieved operating income of 381.56 ppm, an increase of 41 per year.58%; net profit attributable to shareholders of the parent company was 9.79 trillion, down 32 a year.07%; net profit attributable to shareholders of the parent company after deduction of non-profit is 9.12 ppm, a decrease of 31 per year.18%, budget benefit 0.04 yuan.The company’s comprehensive gross profit margin is 11.24%, a decline of 3 per year.01 averages.Mainly due to factors such as the decline in the prices of copper and zinc and the increase in the proportion of trade income.Among them, the comprehensive gross profit margin of mining enterprises was 44%, a decrease of 5 compared with last year.82 units; comprehensive gross profit margin of smelting enterprises is 1.41%, a decline of 0 every year.18 units.From the company’s three major products, the gross profit margin of mineral gold in the first half of 2019 was 36.29%, a decrease of 3 from the same period last year.85 units; gross profit margin of mineral copper is 43.76%, down 9 from the same period last year.09 coal mines; gross profit margin of mineral zinc was 48.75%, down 19.85 units.At the same time, the company’s selling expenses (+46.22%) and administrative expenses (+36.93%) grew rapidly. The company’s gold, copper and zinc production maintained a high growth trend.The company produced 151,735 microns of gold in the first half of 2019, an increase of 44 over a year.63%, of which mineral gold was 19,104 millimeters, an increase of 13 over.18%.Smelting, processing and trade gold is 132,631 mm, more than ten years.66%.397,269 tons of copper were produced, an increase of 17 over.81%, of which 171,089 tons of mineral copper, a year-on-year increase of 43.33%, mainly due to the completion of the flotation system and the wet system of the Kolwezi copper mine in the DRC, the second phase of Duobaoshan commissioning, and the increase in the new merger and acquisition of Zijinboer Copper.It produces 295,377 tons of zinc, an increase of 21 per year.24%, of which the mineral zinc concentrate contains 186,748 tons of zinc, an increase of 25 year by year.92%, mainly due to the increase in the newly acquired Bisha project; 108,628 tons of zinc ingots were produced by smelting, an increase of 13.96%.Due to the company’s abundant mineral resources reserves, the output is expected to continue to grow in the future. Key projects have progressed in an orderly manner, and the results of mergers, acquisitions and reserves increase have been obvious.In terms of overseas projects, the company’s new merger and acquisition project integration work was efficiently implemented. After the takeover of the Serbian Bol (copper) mine, the smooth transition was achieved, and the Timok copper-gold mine construction progressed in an orderly manner; Congo (Gold) Kamoa-KakuSignificant progress has been made in the construction of the La Copper Mine Project. Newly discovered high-grade massive copper sulfide mineralization was discovered in the northern part of Kamoa; the poly (gold) Kolwezi copper (cobalt) ore 5 injection capacity wet process system was put into operation.Entered the rank of 10-pound / grade large-scale copper mines, and copper and cobalt resources continued to be implemented; production capacity of the Paxin Pogra gold mine resumed and increased; Tuwalongxing zinc polymetallic ore mining system was completed; Kyrgyz Autongke gold mine; TajikzeThe technical achievements of the Lavshan gold mine have been outstanding.In terms of domestic projects, the trial use of Zijin Copper’s copper smelting resources for comprehensive utilization and harmless disposal projects, the second-phase expansion project of the Duobaoshan Copper (Molybdenum) Mine in Heilongjiang, the Qiqihar Copper Smelting Project in Heilongjiang, entering its final phase, and Xinjiang Zijin Zinc Industry adding 15,000t / d The construction of low-grade and waste rock resources comprehensive utilization technology transformation projects is advancing steadily.The company constantly improves the standardized management of engineering projects, strengthens the supervision and control of the whole process, and the overall efficiency has reached a new level.For exploration, the company invested geological exploration funds in the first half of 20192.1.1 billion, completed 160,000 meters of drilling and 5,020 meters of drilling.Yixingzhai-Yilian Gold Mine, Shanxi Province, Henan Luyuangou and Shanggong Gold Mine achieved important results, Congo (Gold) Camoa North Ore Belt, Kyrgyz Odongke C2 Orebody, Tajik Gilao Gold Mine, XinjiangSignificant progress has been made in such supplementary reconnaissance projects as the Sele Copper Mine and the Wulagen Zinc Mine in Wuqia County. The price of gold is expected to remain high.Global trade frictions have increased, downward pressure on the world economy has increased, European and American expectations for greater easing have increased, market demand for safe havens has increased, and gold prices have performed well in 2019. By the end of August, the price of gold in London had increased by more than 20% earlier.As the global economic uncertainty is still resisting, gold prices are expected to continue to fluctuate at a high level in the second half of the year. Copper and zinc prices are relatively weak.In terms of copper, domestic TC / RC processing fees continue to fall, there is a contradiction between the tightening of the mine end and the expansion of smelting capacity. The spot market remains “tightly balanced”, but the relatively weak downstream demand limits the rebound of copper prices.The average LME copper price in the first half of the year was US $ 6,167 / tonne, a decrease of 10.88%; the average domestic copper price was 48,300 yuan / ton, a slight decrease of 7.05%.It is expected that the demand is weak, the trend of tight supply still needs to be maintained, and the probability of copper prices remaining low and fluctuating is high.In terms of zinc, zinc ore supply is relatively abundant, and downstream consumption has shown negative growth, resulting in a weak operation of zinc prices.In the first half of the year, the average LME zinc 北京夜网 price was US $ 2,732 / tonne, a decrease of 16%.27%; the average domestic zinc price was 21,655 yuan / ton, a slight decrease of 13.45%.The current domestic economic downward pressure resistance, land reserve policy will not relax, weak demand may continue to suppress zinc prices. Earnings forecast and estimation: Without considering the issue of diluted shares, it is expected that the company’s EPS for 2019-2021 will be 0.21 yuan, 0.27 yuan and 0.32 yuan, according to August 30 3.At the closing price of 66 yuan, the corresponding PE is 18 respectively.0 times, 13.5 times and 11.5 times.Considering that the company is one of the largest integrated mining companies in China and has abundant resource reserves; the company’s application for the public issuance of A shares has been reviewed and approved by the Issuance Review Committee of the China Securities Regulatory Commission.Continue to give the company an “overweight” investment rating. Risk reminders: (1) Macroeconomic downturn and weak downstream demand; (2) The company’s project progress is less than expected; (3) Metal prices continue to fall.