\u3000\u3000 Western Mining Co.Ltd(601168) (601168)
Event: on January 25, 2022, the company issued the announcement of annual performance increase in 2021. It is estimated that the company’s net profit attributable to the parent company in 2021 is about 2.908 billion yuan, a year-on-year increase of 220%, deducting about 2.846 billion yuan of net profit not attributable to the parent company, a year-on-year increase of 144%. In a single quarter, Q4 is expected to realize a net profit attributable to the parent company of about 650 million yuan, a month on month decrease of 23.28%, deducting a net profit not attributable to the parent company of about 645 million yuan, a month on month decrease of 23.01%. The performance is in line with our expectations.
Yulong Copper Mine’s phase II incremental superposition of the annual high price of main metals, and the company’s performance in 2021 increased significantly year-on-year. Output: in 2021, the second phase of Yulong Copper Mine of the company successfully reached production capacity. The copper concentrate output of 2021h1 company increased from 23346 tons to 56043 tons, with an increase of 32697 tons. Considering that Q1 is still in the production capacity climbing stage, the output should be higher in the second half of the year. Yulong phase II is expected to contribute more than 70000 tons during the year. With 30000 tons of Yulong phase I and 20000 tons of geqi copper mine in Inner Mongolia, the annual output of copper concentrate is expected to exceed 120000 tons, a year-on-year increase of more than 150% compared with 47500 tons in 20 years. Price: in 2021, the average price of copper increased by 40.4% year-on-year to 68300 yuan / ton, and the price of zinc increased by 23.1% year-on-year to 22300 yuan / ton.
21q4 iron ore prices fell month on month, while at the end of the year, there may be more expenses withdrawn, resulting in a decline in profits month on month. Output: the second phase of Yulong copper was put into operation smoothly. It is expected that it will be in full production in the second half of the year, and the output of Q4 will remain stable month on month. Price: Q4 copper and zinc prices rose steadily month on month, while iron ore prices fell significantly month on month. LME copper, LME zinc, LME lead and iron ore prices changed by + 1.9%, + 10.74%, – 1.9% and – 37.7% month on month respectively. In addition, near the end of the year, Q4 may have some expenses withdrawn or impaired.
Future core focus:
① phase II of Yulong copper mine will be fully produced in 2022, and the output of copper concentrate may reach 100000 tons. Assuming that the output of phase I of Yulong Copper Mine and Huogeqi Copper Mine remains unchanged, the output of copper concentrate of the company may reach 150000 tons in 2022. Yulong copper mine is the second largest single copper mine in China. The proven amount of copper metal is about 6.5 million tons, with a grade of 0.68%. The annual output of ore after full production is nearly 20 million tons. According to the calculation of average grade, the annual output of copper concentrate is 130000 tons. The company currently holds 58% of its equity. The first phase of the copper mine project was completed in 2016, and the second phase was officially put into operation at the end of 2020. It began to contribute to the increment and gradually reach full production in 2021, and reached full production in 2022. The output of copper concentrate may still increase year-on-year.
② nickel and vanadium projects are expected to be put into operation successively in 2022. In 2020, the company has 252400 tons of nickel resource reserves. The reconstruction and expansion project of nickel mine is expected to be put into trial production in the first half of 2022, with an annual output of 3000 tons of nickel metal after reaching the production capacity; The second phase expansion of xikuang vanadium Technology Co., Ltd. is expected to be commissioned in April 2022.
Investment suggestion: the metal price is high, Yulong continues to increase the company’s profit, and the company’s performance grows steadily. We expect that the company will realize net profit attributable to the parent company of 2.92 billion yuan, 3.41 billion yuan and 3.61 billion yuan from 2021 to 2023, with EPS of 1.23 yuan, 1.43 yuan and 1.51 yuan respectively; The PE corresponding to the closing price on January 25 was 11, 9 and 9 times respectively, maintaining the “recommended” rating.
Risk tip: the product price has fallen sharply, the release of production capacity is less than expected, and the downstream demand is less than expected.
