CNMC (000758) In-depth Research Report: Injecting high-quality undervalued copper assets to clear historical burdens and return to the main business with new vitality

CNMC (000758) In-depth Research Report: Injecting high-quality undervalued copper assets to clear historical burdens and return to the main business with new vitality

Well-known multinational company that develops project contracting and resource development in coordination.

As one of the enterprises that has initially “going global” in China, CNMC has developed from a single project contract in the initial stage of development to an international project contracting and mineral resources development. The international project contracting has promoted the development of non-ferrous mineral resources.Develop internationally renowned multinational companies that promote project contracting and coordinated development of the two major businesses.

Inject 都市夜网 copper assets to enhance core competitiveness.

CNMC intends to acquire 2.6 billion ordinary shares of China Nonferrous Mining held by CNMC Mining by issuing shares, accounting for 74 of the total issued ordinary shares of China Nonferrous Mining.

52%.

After the completion of this transaction, CNMC will cut into the field of copper and cobalt products on the basis of existing engineering contracting, lead and zinc mining and smelting and other businesses.

As a territorial listing platform with “resources + engineering” as its core, the company focuses on the resource control capabilities of lead, zinc, copper, cobalt and other metals in the resource field. It divides the high-quality sections of China Nonferrous Group into listed companies and uses overseas mineral resources.The first-mover advantage of development and the historical experience of “exchanging resources for engineering” continue to improve resource control and the level of professionalization of mining engineering.

China Nonferrous Mining: Significantly underestimated quality copper.

(1) Copper standard with comprehensive advantages of copper cost and profitability: The company’s copper ore grade is high, the gross profit of wet smelting reaches 40%, the price of local sulfuric acid is high, and the demand for sulfuric acid is strong due to the prevailing local wet smelting.

The company’s ROE is close to 20%, its profitability has improved, and its cost advantage; (2) The copper standard with faster growth and better growth: The company’s thermal and wet smelting capacity in 2020 is expected to reach 48 tons, and in 2021The production capacity is expected to reach 51 tons. The smelting capacity is expanding faster and has better growth.

The smelting capacity is close to half of Jiangxi Copper’s volume, of which the wet production capacity is 14 inserted, and the gross profit margin is much higher than that of the fire production capacity; (3) Substituting alternative copper standards in A shares: This time China Nonferrous Mining Industry 74 will be used.

52% of the equity is injected into CNMC, the company’s internal business can contribute about 300 million profits, and China Nonferrous Mining’s profits in recent years have been close to 1 billion US dollars.

China Nonferrous Mining is expected to have a profit of 1.5 billion in 2019, 74.

The 52% equity corresponds to a profit of 1.1-12 billion, and the overall profit is about 1.4-1.5 billion.

The corresponding valuation after the additional issue is 12-13 times, and the median estimate of the stock copper target; (4) The copper target with a cobalt budget attached: the company currently owns 2.

235 cobalt copper cobalt alloy production capacity and 2000 tons of crude cobalt hydroxide production capacity, the company’s long-term planning of carbon dioxide production capacity will reach 8,000 tons, equivalent to half of the volume of cobalt in Luoyang Molybdenum Industry, in the long run through the use of cobalt to further thicken the gross profit margin.

With the historical burden cleared, there is still room for growth in the long-term lead and zinc business.

The company announced the bankruptcy and reorganization of its subsidiary, Shenye Machinery, to remove the historical burden; the Dari lead-zinc mine project in Indonesia is expected to be heavy in the future.

Earnings forecast, estimation and investment rating: The company’s long-term lead and zinc business is expected to maintain a steady growth trend. The conversion of Indonesia’s Darui lead and zinc mine to gradually reach production will increase the company’s gross profit.

We expect the company’s net profit attributable to its parent for 2019-2021 to be -4.

2.6 billion, 1.

$ 8.8 billion and 2.

80 trillion, EPS is -0.

22 yuan, 0.

10 yuan and 0.

14 yuan.

Under the assumption that the average copper price in 2020 will be 5% lower than in 2019, the net profit of China Nonferrous Mining is expected to be 10 in 2020.

8.3 billion.

74.

The corresponding performance of 52% equity is 8.

At US $ 0.7 billion, the scale business of CNMC can contribute approximately US $ 300 million in performance, with an overall performance of approximately US $ 1 billion, corresponding to an estimated market value of 14 times after the additional issue.

The company is expected to repair to an average of 20 times the A-share copper standard. It is expected that there will be 50% room for upward repair. The first coverage will be given a “strong push” rating.

Risk reminder: Asset integration implementation is less than expected, copper and zinc prices have fallen sharply, and asset injection assessments have fallen short of expectations.