First Shanghai released a research report stating that Zhaojin Mining (01818) achieved sales revenue of RMB 8.424 billion for the whole year of 2023, an increase of 6.82% compared with the previous year. It achieved a gross profit of 3.37 billion, a year-on-year increase of 26.90%; the gross margin was 40.1%, an increase of 6.33 percentage points year-on-year. It achieved a net profit attributable to the parent company of RMB 686 million, an increase of 70.77% year-on-year. The performance has achieved significant growth. The company produced 24.68 tons of gold throughout 2023, a year-on-year decrease of 9.75%; among them, the production of mineral gold was 17.58 tons, a year-on-year decrease of 8.63%, and the smelting and processing gold was 7.11 tons, a year-on-year decrease of 12.39%. The main reason for the decline in gold production is the reduction in company's purchase of gold.
The bank stated that as of now, the Haitan gold mine project is still in the project construction phase, and according to the project plan, the Haitan gold mine will be initially completed in 2025. After the overall production and reaching production capacity, it is expected that the Haitan gold mine can achieve an annual production of 15-20 tons of mineral gold. In addition, the company successfully acquired TieTuo mining, further increasing its resource reserves.
The bank predicts that the company's revenue from 2024 to 2026 will be RMB 10.32 billion, RMB 13.09 billion, and RMB 15.766 billion, respectively. The net profit attributable to the parent company is expected to be RMB 1.058 billion, RMB 1.697 billion, and RMB 2.137 billion, respectively. Based on the high gold price and the continuous release of the company's future gold production capacity, the bank gives the company a target price of HKD 17.46 in the next 12 months, corresponding to the central value of the 35x PE valuation for 2025, with an upside of 27.60% compared to the current price. The bank initiates coverage and gives it a buy rating.