The mineral resources development business of MCC and China railway can not be underestimated
The impact of the mineral resources development business of MCC and China Railway on the overall performance can not be underestimated. In 21h1, the business revenue of MCC and China Railway was 3.5 billion and 2.6 billion respectively, accounting for 1.4% and 0.5% of the total revenue respectively; The gross profit was 1.5 billion yuan and 1.4 billion yuan respectively, accounting for 6.0% and 3.1% of the total gross profit respectively. Under the background of multi factor resonance, the mainstream metal price has risen steadily since 20h2, which has driven the obvious improvement or sustainability of the benefits of mineral resources development business such as MCC and China Railway. We think we should pay attention to the impact of this business on the company’s future statements.
Metallurgical Corporation Of China Ltd(601618) has abundant nickel / cobalt / lead / copper resources in the three important mining projects under operation (the retained resources are equivalent to 132 / 14 / 87 / 39 / 1290000 tons of nickel / cobalt / zinc / lead / copper metals respectively), As the benchmark project of lateritic nickel cobalt mine in the world, Ruimu nickel cobalt mine project contributes to the core performance of the company’s resource development business (the yield has exceeded 100% for many consecutive years, and the unit cash production cost of similar projects in the world is the lowest, etc.). The net profit of MCC’s resource development business in 21h1 was 1.06 billion (accounting for 16.1% of the company as a whole). The asset liability ratio of the business at the end of 21h1 was 78.3%, which was 31.3pct lower than the high point at the end of 18fy.
China Railway’s mining business has gradually entered the mature operation stage as a whole, and its copper / molybdenum production capacity ranks in the forefront of its peers in China. At this stage, a total of 5 mines have been built with wholly-owned / holding / equity investment at home and abroad, with a total retained resources / reserves of about 8.3 million tons of copper, about Shanghai Pudong Development Bank Co.Ltd(600000) tons of cobalt and about 650000 tons of molybdenum. China railway resources, a wholly-owned subsidiary, is responsible for the business of this sector. In 21h1, it achieved a net profit of 1.47 billion, yoy + 127%, accounting for 10.3% of the overall net profit of China Railway (vs20fy is 8.3%), and its asset liability ratio has also decreased steadily in recent years.
The overall impact of the resource development business performance of MCC and China Railway on the company may be increasing, and the potential value should be paid attention to
The results of splitting the mineral resources development business of MCC and China Railway show that nickel price and copper price are the core variables affecting the business benefits of MCC and China Railway respectively. Based on the price changes of major metals, we have made a prospect and sensitivity analysis on the business performance of the two companies.
Under the neutral assumption (assuming that the annual average price of 22fy main metal varieties increases by 15% compared with 21fy), the net profit of MCC’s 21fy and 22fy resource development business is expected to be 2.17 billion and 3.28 billion respectively, yoy respectively + 527% and 51%, and its proportion to the overall net profit scale of MCC in 20fy is 23% and 35% respectively; The sensitivity measurement results show that (the main hypothetical variable is metal price, especially nickel price), the net profit of 22fy MCC is in the range of 1.44-5.12 billion, which is in the range of 15% – 55% compared with the overall net profit of 20fy MCC.
Under similar neutral assumptions, the net profit of China Railway 21fy and 22fy mineral resources development business is expected to be 3.42 billion and 6.01 billion respectively, and the proportion of their overall net profit scale to that of China Railway 20fy is 13% and 22% respectively; Similar sensitivity measurement results show that the net profit range of 22fy China Railway is 1.76-10.46 billion, which is in the range of 7% – 38% compared with the overall net profit of 20fy China Railway.
Sensitivity measurement shows that there is a large fluctuation range in the performance of MCC and China Railway’s mineral resources development business, which has a significant impact on the company’s overall performance and existing capacity, and its potential value is worthy of attention.
Risk tip: metal prices fluctuate sharply, mineral project operation accident risk, geopolitical risk, and there is a certain subjectivity or deviation risk in the calculation.
