Inner Mongolia Dazhong Mining Co.Ltd(001203)
On April 22, 2022, the company released the first quarterly report of 2022: in 2022q1, the company achieved a revenue of 1.305 billion yuan, an increase of 77.94% year-on-year and 22.57% month on month; The net profit attributable to the parent company was 447 million yuan, with a year-on-year increase of 27.04% and a month on month increase of 119.95%; Net profit deducted from non parent company was 444 million yuan, with a year-on-year increase of 29.46% and a month on month increase of 124.27%.
The net profit attributable to the parent company in 2022q1 increased year-on-year and month on month. On a year-on-year basis, the net profit attributable to the parent company in 2022q1 increased by 99 million yuan year-on-year. Although the price of Q1 iron concentrate powder decreased by 13.79% year-on-year and the pellet price decreased by 0.57% year-on-year, the company’s production capacity was released and it is expected that the company’s increase in iron ore outward mining and processing sales will increase the sales volume, resulting in a year-on-year increase in Q1 gross profit of 177 million yuan; On a month on month basis, the net profit attributable to the parent company in 2022q1 increased by 233 million yuan on a month on month basis, mainly due to the 11.42% month on month increase in Q1 iron concentrate price, 2.08% month on month increase in pellet price, and the increase in sales volume, which increased the company’s gross profit by 381 million yuan on a month on month basis. In addition, the month on month ratio of non operating revenue and expenditure and impairment loss jointly supported the growth of Q1 performance.
Future core focus: continue to expand new production capacity and enhance core competitiveness
① the continuous expansion of production capacity drives the release of the company’s performance. In 2021, the company publicly issued shares and listed, raising a net amount of 1815247900 yuan. Among them, the raised investment project “re concentration of iron ore mining and beneficiation project” has been completed and transferred to fixed assets, which has promoted the continuous expansion of the company’s iron concentrate production capacity; “Jinrisheng 1.5 million T / a pellet project” has been completed and converted into fixed assets successively. The project revenue of 52 million yuan will be realized in 2021, which will increase pellet sales and further expand the company’s industrial chain; “Jinrisheng 1.4 million tons and 1.85 million tons of dry waste rock projects” will also be completed by the end of 2022 and June 2023 respectively, so as to improve the company’s sand and stone production capacity.
② it is planned to issue convertible bonds, and the company’s output is expected to further increase. Recently, the company started issuing convertible bonds and plans to raise a total of 1520 million yuan, including “mineral processing technology transformation, iron and mica separation project”, “intelligent mine mining and beneficiation mechanization and automation upgrading project” and “zhouyoufang iron mine mining and beneficiation project”. After the implementation of the convertible bond project, the annual output of the company will increase 390000 tons of iron concentrate and 100000 tons of mica concentrate. At the same time, the level of mechanization, automation and informatization will also be improved, laying a strong foundation for sustainable and rapid development.
Profit forecast and investment suggestions: we believe that with the gradual implementation of the company’s fund-raising and investment projects, the production capacity of iron concentrate powder will continue to expand, while increasing the pelletizing capacity to enhance the company’s profitability. It is estimated that the net profit attributable to the parent company in 202224 is expected to be RMB 1.87/2.048/2.23 billion, and the PE corresponding to the closing price on April 22 is 10x, 9x and 8x, which is lower than the average level of comparable companies. It is covered for the first time and given the rating of “cautious recommendation”.
Risk tip: the product price fluctuates sharply, the downstream demand is less than expected, and the covid-19 epidemic continues to affect.
