机构:中金公司
评级:BUY
目标价:9.80 港元
2017 results in line with expectations
Zhaojin Mining Industry announced its 2017 results: revenue was flat YoY at Rmb6.7bn and net profit attributable to shareholders was up 82% YoY to Rmb644mn, or Rmb0.20/sh, in line with our expectations. The company declared a dividend of Rmb0.06/sh. In 4Q17, its revenue was Rmb1,896mn (+7% YoY & +9% QoQ), while net profit attributable to shareholders was Rmb218mn (+10.7x YoY & +6.4x QoQ); the large QoQ improvements were mainly due to lower income tax expenses and lower minority interests.
Comments: 1) 2017 mined gold output was 20.3t, flat YoY; processing & smelting gold output was 13.4t (-15% YoY). 2) Gross margin fell by -1.5ppt to 39.5% YoY due to the slight decrease in gold sales volume along with the higher share of its copper operations segment. 3) Administrative fees decreased by 15% YoY due to the implementation of its employee share subscription plan and recognition of share-based payment expenses last year. 4) It effective tax rate fell to 15% vs. 46% in 2016. 5) Resources saw steady growth: as of end-2017, its gold resources were 1,252t and reserves were 528t .And, 6) 2018 guidance: capex of Rmb630mn, total gold volume of 32.1t
Trends to watch
Weak US dollar provides support to gold prices. The weak dollar will support the gold price as well as strengthen gold’s role as an alternative investment asset.
Earnings forecast
Based on assumption changes in unit cost and other expenses, we raise our earnings forecast by 17% from Rmb0.20 to Rmb0.23 per share for 2018. We also introduce 2019e EPS at Rmb0.24.
Valuation and recommendation
The stock is trading at 19.5x 2018e P/E. We maintain our BUY rating and HK$9.80 target price, implying 33x 2018e P/E and 69.84% upside room from the current price.
Risks
Gold price declines by more than expected.