\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 497 Yunnan Chihong Zinc & Germanium Co.Ltd(600497) )
Zinc lead industry leader. In January 2019, the company officially became the holding enterprise of Chinalco group, relying on the excellent resources of central enterprises. At present, the company is mainly engaged in the mining, smelting, deep processing and sales of zinc, lead and germanium series products. The company’s resource share and market share firmly occupy the leading position in the industry.
The reduction of production forced overseas to go to the warehouse, and the zinc price continued to rise. By the end of April 2022, the spot price of zinc ingot has reached an all-time high. Since 2021q4, due to the energy crisis and soaring electricity prices, overseas smelters have reduced production to varying degrees; Low supply forced overseas to go to the warehouse. As of late April 2022, LME zinc inventory fell to a historical low, down nearly 70% year-on-year. At present, the internal and external price difference is huge, the ratio of zinc price to Shanghai to London is only 6.4, and the import loss of single ton of zinc has reached nearly 4000 yuan, resulting in a record low net import of zinc ingots in China; In addition, China’s Q1 zinc smelter has ushered in unscheduled maintenance to varying degrees, with low supply and inventory, and the zinc price has reached a record high. On the demand side, we believe that with the recovery of demand in infrastructure and other fields and the limited increment of new zinc mines put into operation overseas in the medium and long term, the zinc supply and demand pattern is expected to be good for a long time, and the zinc price is expected to remain high for a long time.
Master the world’s top zinc lead ore and tap the potential to expand production. In order to further expand the development of high-quality zinc ore resources, the company has expanded production and storage in Yongchang mining area, Huize lead-zinc mining area, Yiliang lead-zinc mining area, Rongda mining area, Lancang lead-zinc mining area and Mozhu lead-zinc mining area. The two main mines of Huize and Yiliang owned by the company are the world’s first and second richest zinc and lead mines, with mine grades of 27-28% and 21-22% respectively, far exceeding the general level of 7%, so it has a unique cost advantage in mine mining and beneficiation. The company has strengthened the deep edge prospecting in the main mining areas of Huize and Yiliang in Yunnan, overcome the difficulties of deep well exploration and complex geological conditions of hydraulic environment, and is expected to further increase production in 2023. In addition, the company has a lead-zinc metal production capacity of 25000 tons / year in Xizang mozhugongkaxinhu lead-zinc mining area, which is expected to be put into operation in October 2022.
The group has injected resources and entered a high growth stage. The parent company Aluminum Corporation Of China Limited(601600) group, the controlling shareholder of the company, will inject Jinding zinc industry into the listed company. The proved lead-zinc metal reserves of Lanping zinc lead mine held by Jinding zinc industry are 800000 tons, and the annual contribution output is expected to reach 160000 tons, helping the company to achieve a leap in scale. In addition, Qinghai Hongxin is also an excellent zinc resource mine, which is expected to be injected into the company in due time.
Profit forecast and investment rating: we predict that the company’s revenue from 2022 to 2024 will be 23 / 24 / 24.8 billion yuan respectively, with a year-on-year increase of 6% / 4% / 3%; From 2022 to 2024, the net profit attributable to the parent company was 2.5/3/3.6 billion yuan respectively, with a year-on-year increase of 334% / 19% / 20%, and the corresponding PE was 10x / 9x / 7X respectively. Here we select Jinhui Co., Ltd. Shenzhen Zhongjin Lingnan Nonfemet Co.Ltd(000060) as the comparable company, which also focuses on lead-zinc mining and smelting. The valuation of the company in 2022 is lower than that of the comparable company. Considering that the zinc price is expected to remain high for a long time, the company’s zinc concentrate production capacity is expected to expand gradually, and the valuation is lower than that of comparable companies, the company is given a “buy” rating for the first time.
Risk tip: zinc supply exceeded expectations; The demand is less than expected; The company’s project is not progressing as expected.
