\u3000\u3 Shengda Resources Co.Ltd(000603) 993 China Molybdenum Co.Ltd(603993) )
Event: China Molybdenum Co.Ltd(603993) released the 2021 annual report. In 2021, the company’s total revenue and total profit hit a record high, and the gross profit increased significantly. The operating revenue was 173863 billion yuan, a year-on-year increase of + 53.89%; The net profit attributable to the parent company was 5.106 billion yuan, a year-on-year increase of + 119.26%; Non net profit attributable to parent deduction was 4.103 billion yuan, a year-on-year increase of + 276.24%. In 2021q4, the operating revenue in a single quarter was 47.304 billion yuan, a year-on-year increase of + 44.77% and a month on month increase of + 13.32%; The net profit attributable to the parent company was 1.548 billion yuan, a year-on-year increase of + 115.19% and a month on month increase of + 34.65%; The non net profit attributable to the parent company was RMB 2.189 billion, with a year-on-year increase of + 549.86% and a month on month increase of + 326.70%.
The volume and price of copper and cobalt increased simultaneously, contributing to the release of performance: the mining production sector of the company performed well: 1) volume: TFM copper output in 2021 was 209120 tons, a four-year high, with a year-on-year increase of 14.53%; The annual output of cobalt was 18501 tons, a three-year high, with a year-on-year increase of 19.86%. The output of phosphorus fertilizer in Brazil reached a new high since the establishment of the plant in Brazil, with a year-on-year increase of 2.41%. In addition, the output of molybdenum, tungsten and niobium changed by + 18%, – 0.25% and – 7.68% respectively year-on-year.. 2) Price: the prices of the company’s main products have increased by more than 20%, of which the annual average price of copper is US $9317 / ton, with a year-on-year increase of 50.61pct; The average price of cobalt products was US $23.98/lb, with a year-on-year increase of 56.02pct; The average annual price of molybdenum oxide was 15.9 US dollars / pound, with a year-on-year increase of 82.76 PCT; The average price of tungsten (APT) products was 153800 yuan / ton, with a year-on-year increase of 20.53pct; The average price of ferroniobium was US $42.54/kg, with a year-on-year increase of 71.6pct; The average price of monoammonium phosphate was 694 US dollars / ton, an increase of 105.93 PCT year-on-year. Both volume and price increase contribute to the release of performance.
The results of cost reduction and efficiency increase are remarkable, the three fee rates continue to improve, and the R & D investment is increased: the company continues to carry out cost reduction and efficiency increase activities in each operation unit after completing the three-year cost reduction target of US $500 million ahead of schedule in 2020. In 2021, the production and operation costs of the mining and processing sector of the company achieved year-on-year cost reduction and efficiency increase of more than 1.6 billion yuan in the same caliber. In 2021, the company’s three fee fee fee was 2.74 billion yuan, and the three fee rate was 1.58%, a year-on-year decrease of 34.69%. Among them, the improvement of management expense rate was the most prominent, with a year-on-year decrease of 23.99%. In addition, in 2021, the company’s R & D expenditure was 270 million yuan, accounting for 0.16% of the operating revenue, an increase of 197 PCT. The expenditure is mainly invested in the research on the improvement of production process and environmental governance in Sandaozhuang mining area, and the research on the improvement of production process of SHANGFANGGOU high talc molybdenum mine. The company also uses 5g technology to realize unmanned mining, greatly improve the guarantee capacity and production efficiency of safety production in the mining area, and consolidate the high-quality development route.
The company maintained abundant cash flow, accelerated the development of TFM mixed ore and KFM in the Democratic Republic of the Congo, and steadily grew into a leading world-class copper cobalt mine: the company insisted on maintaining liquidity to support the capital expenditure required for the construction year. In 2021, the company’s monetary capital balance was 24.3 billion yuan, and the asset liability ratio excluding ixm was 55.45%, and the financial structure was still stable. After excluding the impact of trading activities, the net cash flow from operating activities was RMB 11.81 billion in 20203. The company will position 2022 as the construction year and will speed up the construction of two world-class mines in the Democratic Republic of the Congo. The total mineral resources of TFM and KFM copper cobalt mines of the company are 1216.9 million tons, which has surpassed the resources of Glencore’s four mines by 1120.9 million tons. Among them, after the development of KFM, the company’s copper and cobalt resources in Congo are expected to reach 3098.3/5.573 million tons, exceeding the reserves of Glencore, the world’s largest supplier of cobalt raw materials, by 2194.4/4.662 million tons. After the completion of TFM mixed ore project, the production capacity of copper and cobalt is expected to increase by 2885 / 24300 tons. After the project is fully completed, the company is expected to achieve 530000 tons of copper production capacity and 44000 tons of cobalt production capacity, which is the largest cobalt mine in the world.
Huayue MHP project may contribute considerable investment income: the company holds 30% equity and 31% underwriting right of Huayue project. The design capacity of the project is mixed nickel cobalt hydroxide (MHP) with an annual output of 60000 tons of nickel metal, containing 7800 tons of cobalt. According to the official account of Hua Yue, the project started construction in March 2020, and was successfully commissioned in November 17, 2021, and was formally commissioned in November 28th of the same year. According to CISC, on March 25, 2022, four sets of high-pressure acid leaching core units have reached full capacity. The project is expected to contribute considerable investment income.
Investment suggestion: we expect the company’s operating income to be 179.1 billion yuan, 1959.9 billion yuan and 220.9 billion yuan respectively from 2022 to 2024, and its net profit to be 7.83 billion yuan, 9.02 billion yuan and 12.212 billion yuan, corresponding to EPS of 0.36, 0.42 and 0.57 yuan / share respectively. At present, the corresponding PE share price is 15.1, 13.1 and 9.7 times. For the first time, it was rated as “overweight-a”, with a 6-month target price of 9 yuan / share.
Risk tips: the progress of the project is not as expected, the price of major metals such as copper and cobalt fluctuates sharply, and the risk of overseas business policy and environment.
