Chihong Zinc and Germanium (600497): 2018 performance for ten consecutive years; mineral lead and zinc decreased slightly

Chihong Zinc and Germanium (600497): 2018 performance for ten consecutive years; mineral lead and zinc decreased slightly
2018 performance grows gradually Chihong Zinc Germanium announced 2018 results: revenue of 19 billion US dollars, ten years +2.6%; net profit attributable to mother 6.2 ‰, a year-on-year decrease of 46%, corresponding to a profit of 0.12 yuan, net profit after return to mother 9.6 ppm, a year-on-year decrease of 16%. Non-recurring gains and losses include non-current asset disposal losses3.900 million.Fourth quarter 2018 revenue 33.500 million US dollars, down 24% / 36% from the previous month / month, and attributed to net profit of -2.1 ‰, year-on-year decrease of 1%.7x / 3.0x, lower than our expectations. Mainly due to the decrease in gross profit profit / moM, investment + fair value changes, monetization from MoM, and 4Q18 operating external expenses.0 million. Comments: 1) Minerals have improved.Production of zinc metal / lead metal in 2018 was 25.6 Democrats / 9.7 Initially, it is reduced by 3 every year.3% / reduction 8.6%.2) The price in the fourth quarter of 18 decreased year-on-year.In 2018, the LME zinc price was $ 2,920 / tonne, +0 a year.9%, LME lead price fell 3 year-on-year.2% to $ 2,239 / t.LME 4Q18 zinc price fell 19%, + 3% MoM, LME lead price fell 21%, MoM 6%.3) The asset impairment loss in 2018 is +4 for ten years.8x to 1.US $ 3.5 billion, mainly due to the provision of inventory depreciation provided by Hulunbuir Chihong and comprehensive utilization of resources, and the input tax on the loss of fixed asset loss (to be deducted) of the subsidiary Yunye Mining Mining; 4) Investment income in the fourth quarter of 2018 + changes in fair valueThe total net value decreased by 73.17 million yuan, 4Q17 and 3Q18 were net income of 2.38 million yuan and 10.3 million yuan respectively; non-operating 西安耍耍网 expenses in 20183.900 million (3 in 4Q18).0 billion), of which 3.3 million came from non-current asset disposal losses.5) The financial expense ratio will decrease by 1 every year in 2018.2ppt, effective tax rate 39%.6) Cash flow from operating activities decreased by 26% to 26 each year in 2018.9 ppm; 7) 2019 plan: the minimum value of mineral lead and zinc 35, which will be reduced by 0 compared to the previous 2018.3 initial. Development Trend Zinc supply is gradually becoming loose.In the short term, demand expectations are improving and Skorpion Smelter (?7 seconds / year) The suspension of production led to a rebound in zinc prices, and LME inventory remained low.However, this year, the increase of overseas zinc ore concentrates in China may reach 80 inches, the environmental protection margin will be relaxed, and the recovery of processing fees will promote the smelting capacity. Earnings forecasts are adjusted from assumptions such as production and expenses. We will start with 19/20 earnings forecasts from zero.20/0.21 yuan is reduced by 21% / 26% to 0.16 yuan / 0.15 yuan. Estimates and recommendations Companies currently sustainably correspond to 19/20 years34.4/35.2 times P / E, maintaining recommended level and target price of RMB 7 corresponding to 19/20 44.4/45.4x P / E, a 29% growth potential compared to current expectations. Risks Lower-than-expected downstream demand; lead-zinc prices fell more than expected.

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