\u3000\u3 Shengda Resources Co.Ltd(000603) 979 Jchx Mining Management Co.Ltd(603979) )
I. after years of accumulation, a new pattern driven by two wheels of mining clothing and resources has been formed
The company is a leading enterprise in China’s integrated mine system services, with mine development services and resource development going hand in hand. The company takes mining operation management, mining engineering construction and mining design and technology research and development as its main core business. Based on more than 20 years of mining service experience and technical advantages, the company continues to expand the mining industry chain, successively distributes mineral resources in China, Africa and the Americas, and gradually releases production capacity by the end of 2021. It is expected that the production capacity will reach 50000 tons of copper + 800000 tons of phosphorus (P2O5) in 2025, Officially stepping forward to the “service + resource” two wheel drive development strategy.
II. Mining service business: entering a new round of business cycle, the proportion of overseas high-profit business continues to increase
The mining service industry may enter a new business cycle with the rise of metal prices. According to the LME base metal price index, since 2016, the base metal prices represented by copper have continued to rise, mining enterprises have achieved rich returns, and the demand for capacity expansion has increased. The investment amount of mining enterprises in mine engineering construction and annual mining volume directly affect the total market business of the mining development service industry. Benefiting from the increase of mining capital expenditure, the scale and growth rate of the midstream service end are expected to continue to increase in the next few years.
With the business strategy of “big market, big owners and big projects”, the company will deeply benefit from a new round of mining capital expenditure boom cycle: 1) the mining service industry has entered a new round of boom cycle, and the company’s main business shows an upward industry trend. 2) Relying on the technical advantages represented by the natural caving method, the company has deeply cultivated major customers at home and abroad, especially with the continuous development of overseas markets, and its net profit CAGR has exceeded 20% in recent three years. 3) In the foreseeable future, the stability of Chinese projects, high added value of overseas projects and abundant orders may drive the continuous growth of the company’s overall performance.
III. mining resources business: accumulate and develop, and wait for the outbreak of upstream resources business
The company has expanded its cooperation with many well-known mining enterprises to mine resources business. Since 2019, it has successively arranged a number of mine resources dominated by copper. Up to now, the accumulated equity resource reserves include 1.06 million tons of copper, 19.2 million tons of phosphorus, 6 tons of gold and 242 tons of silver.
According to the project progress disclosed at present, the company has gradually entered the flowering and fruiting period on the resource side, especially the copper mine project, which has also become the basis and core of the company’s continuous growth in the next 3-5 years. It is estimated that 10000 t / a capacity will be released in 2022. After 40000 t capacity is added in 2024, a total of 5 t / a copper mine capacity is expected to be formed.
IV. profit and valuation
As the leader of China’s integrated mining service enterprise, combined with its own technical and experience advantages in the mining clothing industry, the company arranges upstream resources and opens up new growth space. We expect the company to achieve an operating revenue of RMB 4.559/58.02/6.588 billion in 2021, 2022 and 2023, and the net profit attributable to the parent company is RMB 456 million, RMB 802 million and RMB 953 million respectively, with a corresponding EPS of 0.78/1.37/1.63. At present, the PE valuation corresponding to the stock price is 26 / 15 / 12 times respectively.
Considering the business structure of the company, we adopt the segment valuation method: 1) the mining service sector is in a rapid growth period. Combined with the compound growth forecast of the performance in the next three years, we give the company 25X PE for the mining service business for 22 years. It is estimated that the net profit of the mining service business of the company in 2022 will be 600 million yuan, corresponding to the market value of 15 billion yuan. 2) From zero to one in the mining resources sector, the 10000 ton copper mine in dikulushi was successfully put into operation in 2021. With the production of lonshi copper mine in 2024, the company will enter a rapid volume period and is expected to achieve a capacity of 50000 tons of copper mine. According to the average valuation level of the industry, 15x PE is given to the company’s resource business. It is estimated that the net profit of the company’s resource business in 2022 will be 202 million yuan, corresponding to a market value of about 3 billion yuan. In conclusion, the company is given a target market value of 18 billion yuan in 2022, which is covered for the first time, and is given a “buy” rating.
Risk warning: macroeconomic fluctuation risk; Uncertainty risk of overseas market development; Risk of uncertain price of mining metal; The project is put into operation less than expected risk.
