\u3000\u3000 China Molybdenum Co.Ltd(603993) (603993)
China Molybdenum Co.Ltd(603993) starting from the production of molybdenum and tungsten, gradually expand the upstream development of copper, cobalt, gold, niobium and phosphorus and other metals and resources, extend the trade of energy metal materials and mining, and realize the layout of multi variety resources and trade platform through international expansion. The company has four production bases worldwide: China molybdenum tungsten, Congo copper cobalt, Australia copper gold and Brazil niobium phosphorus business. At present, it has developed into the world’s largest scheelite producer, the second largest cobalt niobium producer, the top seven molybdenum producers, the leading copper producer and the second largest phosphate fertilizer producer in Brazil. In 2019, we will participate in and increase Indonesia’s nickel cobalt project and take a key step into the field of new energy. By building a unique and diversified product portfolio, we can maximize the benefits of price cycle rotation.
Counter cyclical layout of multiple varieties and global resources to build a world leading commodity supplier. Reverse cycle acquisition of two world-class high-quality copper and cobalt mines in the Democratic Republic of Congo (DRC) (80%) and KFM (95%). After the mixed ore project is put into operation in 2023, the total production capacity of TFM cathode copper and cobalt hydroxide is expected to reach 470000 tons and 43000 tons respectively, ranking among the first echelon of global copper and cobalt resources. Brazil niobium phosphorus as a “ballast stone” reserve force for continuous energy storage; Australia copper and gold mine signed the first US $550 million metal flow agreement in China to realize part of the company’s value ahead of schedule; The three molybdenum tungsten associated ores have made continuous contributions, and the technical precipitation is thick and thin.
The “mining + trade” model helps the company globalize its international mining positioning and create new profit growth points. Ixm is the third largest trading company in the world, with diversified trading, logistics and mining investment businesses and a global metal futures and spot trading network. Ixm has been responsible for the external sales of the total output of copper and cobalt produced by TFM, the total output of niobium produced by Brazil and part of the output of copper produced by NPM, and has deeply participated in the resource integration of many other levels of the company, so as to realize the closed-loop production and marketing, expand business and further improve the profit stability. Considering the total business scale of spot goods, ixm’s net profit reached 270 million, 770 million and 370 million yuan from 2019 to 2021h1, creating a new profit growth point for the company.
Compared with the fine management of overseas high-quality mining enterprises, the ESG rating ranks first in the industry. In the process of rapid international expansion, the company benchmarked the modern management concept of overseas mining enterprises, built the “5233” management concept, formulated a three-year cost reduction and efficiency increase plan, implemented the application of modern technology, and fully realized the “cost reduction and efficiency increase”. In 2020 and 2021h1, the cost will be reduced by US $500 million and US $363 million respectively. In the 2021msci assessment, the company’s ESG rating was raised to “a”, ranking with Rio Tinto and BHP Billiton, helping the company break through the “shackles” of the traditional mine end concept and move towards a new era of international mining resources enterprises.
Investment suggestion: we estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 5.072 billion, RMB 6.252 billion and RMB 7.403 billion respectively, with corresponding PE of 24.4, 19.8 and 16.7 times and Pb of 2.8, 2.5 and 2.2 times respectively. We believe that the company will build a unique and diversified product portfolio through counter cyclical international acquisition to maximize the income of price cycle rotation, TFM and KFM copper and cobalt mines in the Democratic Republic of Congo in Africa have established the company’s first position in global cobalt resources. Compared with the management mode of overseas high-quality mining enterprises, the effect of “cost reduction and efficiency increase” is remarkable. ESG rating leads China’s mining industry and gives “buy” rating for the first time.
Risk tips: risk of sharp fluctuations in metal prices, overseas asset operation risk, political and policy risk
