Huaan Securities: Gave Zijin Mining a buy rating

2022-01-20Huaan Securities Co., Ltd. Wang Hongyan, Xu Yongqi, Wang Yaqi, Li Xuyang conducted a study on Zijin Mining and released a research report "Copper and Zinc Volume and Price Rise Superimposed Gold Volume Increase To Promote Performance Rise", this report gives a buy rating to Zijin Mining, the current stock price is 9.89 yuan.

Zijin Mining (601899)

Event: The Company discloses the 2021 performance pre-increase report. 1) From the perspective of the whole year, it is expected to achieve a net profit attributable to the mother of about 15.6 billion yuan in 2021, an increase of 139.67% year-on-year; to achieve a non-net profit of about 14.5 billion yuan, an increase of 129.36% year-on-year. 2) From the perspective of the single quarter of Q4, it is expected that 21Q4 will achieve a net profit attributable to the mother of about 4.3 billion yuan, an increase of 122.0% year-on-year, down 7.6% month-on-month; and achieve a non-net profit of 4 billion yuan, an increase of 142.2% year-on-year and 8.4% month-on-month.

Volume-price increases boosted the full year's performance, and Q4 net profit was affected by Kamoa inventory carry-over. Volume: In 2021, the company's mineral gold, copper, zinc (lead), silver and iron concentrate output were 47.5 tons, 584,000 tons, 434,000 tons, 309 tons and 4.248 million tons, respectively, an increase of 17.3%, 28.9%, 14.8%, 3.3% and 9.7% year-on-year; price: The average price of core minerals gold, copper and zinc in 2021 was 3.731 yuan / g, 68,600 yuan / ton, 22,400 yuan / ton, respectively, year-on-year -4%, +41% and +21%, respectively. The volume and price of copper and zinc and the growth of gold production have jointly boosted the performance in 2021. Looking at Q4 separately, the performance decreased month-on-month, mainly due to the underwriting of unsold copper from kamoa copper ore as an inventory carry-forward treatment, offsetting the net profit attributable to the mother of about 400 million yuan, and the performance of kamoa copper mine was not fully reflected in the statement.

The release of gold production capacity has been affected by the epidemic, and the production of the three major copper mines has progressed smoothly and will continue to be released. Due to the epidemic and other factors, the release rhythm of overseas gold minerals such as mainland gold mines is less than expected, compared with the 53-56 tons mentioned in the 2021 production guidelines, the actual output is 47.5 tons, which is 5.5-8.5 tons less than expected at the beginning of the year, and the 2022 production guidelines in the performance forecast are 60 tons, which is also reduced by 7-12 tons accordingly. In the context of the sharp rise in copper prices, the three world-class copper mines of Kamoa-Kakula, Timok and Julong released production capacity as scheduled, and the actual output slightly exceeded the production guideline, and the production guideline in 2022 was further increased to 860,000 tons.

Multi-point blossoming, mergers and acquisitions of lithium resources among the new energy track. The three major copper mines will continue to be put into operation after being put into operation: Kamoa-Kakula was put into operation in May 2021, with an estimated annual output of 200,000 tons of copper, and the second phase is expected to be put into operation in Q2 of 22 years; Timok was put into operation in October 21, with an estimated annual output of 91,400 tons of copper + 2.5 tons of gold; and the first phase of The Dragon (expected annual production capacity of 160,000 tons) was put into operation, and the expected production of copper in 22 years was 120,000-130,000 tons. In October 2021, the company acquired the Argentine 3Q lithium salt lake project, lithium carbonate resources of 7.655 million tons, the average lithium concentration of 621mg/L, the volume ranked among the top five in the world, Zijin quickly ranked among the new energy track.

Investment advice: Copper and gold prices continue to remain high due to the recovery of overseas economies and inflation expectations. The company's mineral resources are abundant and the "purple gold model" improves the operating efficiency of enterprises, we expect that the company's revenue in 2021-2023 is 2091.9/2274.6/240.76 billion yuan, the year-on-year growth rate is 22.0%/8.7%/5.8%; the corresponding net profit attributable to the mother is 156.7/209.7/258.3 billion yuan, the year-on-year growth rate is 140.8%/33.8%/23.2%, and the current stock price corresponds to PE of 17X/258.2% respectively. 12X/10X, maintaining a "Buy" rating.

Risk warning: The company's important mine projects under construction were put into production less than expected; the price of copper and gold fell sharply;

A total of 10 institutions have given ratings in the last 90 days, with 8 buy ratings and 2 overweight ratings; the average target price of institutions in the past 90 days has been 16.53; the Securities Star Valuation Analysis Tool shows that Zijin Mining (601899) good company rating is 4 stars, good price rating is 3 stars, and valuation comprehensive rating is 3.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)