\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 497 Yunnan Chihong Zinc & Germanium Co.Ltd(600497) )
Yunnan Chihong Zinc & Germanium Co.Ltd(600497) core recommendation logic
Sitting on the world's top lead-zinc mines, it has strong profitability
In 2021, the company's average lead-zinc ore grade was 15.11%, and the industry average value was 6.73%. Chihong Huize mining industry was the highest grade in the industry, 27.48%. Compared with major international and Chinese lead-zinc mining enterprises, the grade of the company's lead-zinc mine is significantly higher than that of the same industry. It is a scarce resource all over the world, and the production cost of mine metal is far lower than the average level of the industry. The output of Huize and Yiliang mines accounts for 80% of the total metal output of the company's mines, and the mining and dressing costs of these two mines are in the top 10% of the global zinc mine cost curve.
Zinc industry: low inventory pattern, long-term supply and demand mismatch
After 2019, it is generally believed that the next few years will be in the mine production expansion cycle brought by the bull market of zinc price in 20162018, resulting in the weakening of zinc expectation. However, the scale of capital expenditure in this round is much smaller than that in 20092013, and the corresponding expansion scale of concentrate will also be smaller than that in the previous round. Moreover, disturbed by factors such as the epidemic, the actual output increment is far less than expected. Due to the long-term lack of capital expenditure and the trend decline of the grade of existing mines, according to wood Mackenzie data, the annual growth rate of global zinc concentrate production was only 1.6% from 2021 to 2026. Based on the current projects to be developed, by 2024, the increment of new projects will not be able to make up for the reduction caused by the withdrawal of old mines and the decline of grade, and the global output of zinc concentrate will peak and fall.
At present, the zinc market has a low inventory pattern, especially the deliverable inventory of refined zinc abroad is very low, and the inventory of zinc concentrate in China is very low. Even if there is surplus in the later stage, the demand for replenishing inventory in the industrial chain can absorb the excess. Although the recent epidemic has affected demand, the low growth rate of supply combined with the interference of the European energy crisis on smelting capacity will probably lead to a gap between supply and demand this year. Under the low inventory pattern, the price of zinc is expected to remain at a high level.
Backed by Chinalco group, it has entered a period of accelerated expansion
The company is the only listed platform with lead and zinc as the main industry under Chinalco group. Chinalco group and China copper industry have planned the integration of lead and zinc mining, beneficiation and metallurgy, and the company is expected to usher in an accelerated development period. The company strives to keep the reserves of lead-zinc resources at least 50 million tons by the end of the 14th five year plan, ensure the minimum metal output of 800000 tons / year (strive to 1 million tons / year), and the smelting capacity of lead-zinc is 1 million tons / year (strive to 1.36 million tons / year); The annual operating income is 30 billion yuan; The total annual profit is 4 billion yuan.
Risk warning: the construction progress of the project does not meet expectations; The price performance of non-ferrous metals did not meet expectations.
Investment advice: maintain the "buy" rating
It is estimated that the operating revenue of the company from 2022 to 2024 will be 22.96/23.03/23.16 billion yuan, the net profit attributable to the parent company will be 23.93/28.06/28.90 billion yuan respectively, with a year-on-year growth rate of 309.4/17.3/3.0%, the diluted EPS will be 0.47/0.55/0.57 yuan respectively, and the corresponding PE of the current stock price is 11.7/10.0/9.7x. Through multi angle valuation, we believe that the reasonable valuation range of the company is between 7.8-8.5 yuan, and the dynamic P / E ratio in 2022 is between 16-18 times. Compared with the current stock price of the company, there is about 41% - 54% space, and the corresponding total market value is between 38.4-43.2 billion yuan. We believe that the company is a leader in China's lead-zinc industry, with the world's best quality lead-zinc mine and strong profitability. It is expected to accelerate the expansion by integrating lead-zinc mining, dressing and metallurgy with the controlling shareholder, fully benefit from the upward cycle of zinc price and maintain the "buy" rating.
