Metal Prices Under Pressure, Maintain "Neutral"

Transcription

1 CMOC (3993 HK) Nonferrous Metals Sector Equity Research 股票研究 Company Report: CMOC (3993 HK) 公司报告 : 洛阳钼业 (3993 HK) [Table_Summary] Metal Prices Under Pressure, Maintain "Neutral" 金属价格承压, 维持 中性 评级 Kevin Guo 郭勇 (86755) kevin.guo@gtjas.com 公司报告证券研究报告 Equity Research Report Company Report The 218 interim results of the Company were higher than market consensus and our expectations. Total revenue of the Company increased 2.63% yoy to RMB 14.6 billion and net profit attributable to shareholders increased % yoy to RMB 3.12 billion. Revise up molybdenum and tungsten price assumptions, but maintain other metal price assumptions unchanged. We believe that the fundamentals of molybdenum and tungsten will continue to improve in the second half of 218. We expect fundamentals of cobalt to remain healthy and cobalt price to stay high. We expect the global copper market to be more stable in 218 and the average annual copper price to trade between US$ 6,/t-US$ 6,5/t. Maintain mining output assumptions unchanged. In 218, the Company plans to produce 13,5-14,9 tons of metal equivalent molybdenum concentrate, 11,-12, tons of metal equivalent tungsten concentrate, 32,-34, tons of mined copper from Northparke, 19,-25, tons of mined copper and 16,-17,5 tons of mined cobalt from Tenke. The production of the Company was stable in the first half of 218 and we maintain mining output assumptions unchanged. Revise down TP to HK$ 2.95, maintain "Neutral". 公司 218 年上半年业绩高于市场一致预期和我们的估计 公司收入同比增加 2.63% 至 人民币 14.6 亿元, 股东净利同比增长 % 至人民币 31.2 亿元 Rating: Neutral Maintained 评级 : 中性 ( 维持 ) 6-18m TP 目标价 : HK$2.95 Revised from 原目标价 : HK$3.8 Share price 股价 : Stock performance 股价表现 (1.) (2.) (3.) (4.) % of return HK$2.81 (5.) Sep-17 Dec-17 Mar-18 Jun-18 Aug-18 HSI Index CMOC 有色金属行业 上调钼价和钨价假设, 但维持其它金属价格假设不变 我们预计钼和钨的基本面在 218 年下半年继续改善 我们预计钴的基本面保持健康且钴价将维持在高位 我们预计全球铜市场在 218 年将更加稳定, 年度铜均价将在 6,-6,5 美元 / 吨之间波动 维持矿产品产量假设不变 公司计划在 218 年生产 万吨等量金属的钼精矿, 万吨等量金属的钨精矿,Northparke 生产 万吨矿产铜,Tenke 生产 万吨矿产铜和 万吨矿产钴 公司上半年生产稳定, 我们维持矿产品产量假设不变 下调公司目标价至 2.95 港元, 维持 中性 评级 [Table_PriceChange] Change in Share Price 股价变动 Abs. % 绝对变动 % Rel. % to HS Index 相对恒指变动 % Avg. Share price(hk$) 平均股价 ( 港元 ) 1 M 1 个月 3 M 3 个月 1 Y 1 年 (21.7) (42.1) (41.8) (15.5) (27.7) (37.) [Table_ Year End Turnover Net Profit EPS EPS PER BPS PBR DPS Yield ROE 年结收入股东净利每股净利每股净利变动市盈率每股净资产市净率每股股息股息率净资产收益率 12/31 (RMB m) (RMB m) (RMB) ( %) (x) (RMB) (x) (RMB) (%) (%) 中洛外阳钼运业输 216A 6, A 24,148 2, F 26,468 5, F 27,362 5, F 27,921 5, [Table_BaseData] Shares in issue (m) 总股数 (m) 19,46.9 Major shareholder 大股东 Hongshang Group 24.7% Market cap. (HK$ m) 市值 (HK$ m) 53,521.8 Free float (%) 自由流通比率 (%) 75.3% 3 month average vol. 3 个月平均成交股数 ( ) 55,83.6 FY18 Net gearing (%) FY18 净负债 / 股东资金 (%) Weeks high/low (HK$) 52 周高 / 低 (HK$) 6.96 / 2.74 FY18 Est. NAV (HK$) FY18 每股估值 ( 港元 ) 4.6 Source: the Company, Guotai Junan International. See the last page for disclaimer Page 1 of 6

2 The 218 interim results of the Company were higher than market consensus and our expectations. Total revenue of the Company increased 2.63% yoy to RMB 14.6 billion and net profit attributable to shareholders increased % yoy to RMB 3.12 billion. The significant growth in profit was mainly attributable to higher metal price, reduced financial costs and increased equity in the Tenke Mine. The production of the Company was stable in the first half of 218 and mining outputs of major products were generally in line with the production plan. The output of molybdenum decreased by 2.5% yoy to 7,957 tons, the output of tungsten concentrate increased by.7% yoy to 5,691 tons, the output of copper concentrate from NPM decreased by 12.% yoy to 16,649 tons, and the output of mined copper and cobalt from Tenke was 84,23 tons and 9,29 tons. All product prices rose significantly in the first half of 218. Average molybdenum and average tungsten prices increased by 41.7% yoy and 42.8% yoy in the first half of 218, respectively, and average copper price increased by about 21.4% yoy in the first half of 218. Cobalt was the best performer; the average price in the first half of 218 rose 7.1% to US$ 84,576/t. Figure-1: China Fe-Molybdenum 6% price Figure-2: China Fe-Tungsten 7% price 35, RMB/t 2, RMB/t 3, 18, 16, 25, 14, 2, 12, 15, 1, 8, 1, 6, 5, Jan-6 Jan-8 Jan-1 Jan-12 Jan-14 Jan-16 Jan-18 4, 2, Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Figure-3: LME cobalt spot price Figure-4: LME copper price 1, 9, 8, USD/t 12, 1, USD/t 7, 6, 8, 5, 6, 4, 3, 4, 2, 1, 2, Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-9Jan-1Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Jan-17Jan-18 Revise up molybdenum and tungsten price assumptions, but maintain other metal price assumptions unchanged. We believe that the fundamentals of molybdenum and tungsten will continue to improve in the second half of 218 as the shutdown of many mines significantly reduced output and changed global supply and demand balance. China s supply-side reform had significant impact on the supply of molybdenum and especially tungsten, as China is the largest producer of tungsten. Although consumption demand from downstream sectors did not increase much, total domestic supply contracted much due to more stringent environmental requirements. Some mines were forced to shut down and some mines were forced to reduce output. We expect the impacts of such policies to be sustained in the second half of 218. We expect molybdenum and tungsten prices to continue to rebound in the second half of 218 and revise up molybdenum and tungsten price assumptions. Cobalt price benefited greatly from the electric vehicle fever and the surge in demand for lithium batteries, rising more than 1% in 217 and continue to rise in the first half of 218, however, it started to retreat since June as the market fever cooled down. We expect the fundamentals of cobalt to remain healthy, the prevalence of electric vehicles in China, the US, Europe and other areas to persist, and consumption demand of cobalt to grow steadily over the next 3-5 years. We expect cobalt price to continue to stay high in the second half of 218. We expect the global copper market to be more stable in 218 See the last page for disclaimer Page 2 of 6

3 and average annual copper price to trade between US$ 6,/t-US$ 6,5/t. We expect the global copper market to remain at a normal level in 218 after a significant surge in and deep dive in As China s economy enters into the "new normal", global copper consumption demand is not expected to record such huge growth as seen during the last decade. On the supply side, miners confront a more stable market and expect reasonable return. As a result, we expect the global copper market to become more stable under new supply-demand constraint conditions. We expect copper prices to trade between US$ 5,4/t-US$ 7,2/t in 218, and the average copper price may be around US$ 6,/t-US$ 6,5/t. Maintain mining output assumptions unchanged. In 218, the Company plans to produce 13,5-14,9 tons of metal equivalent molybdenum concentrate, 11,-12, tons of metal equivalent tungsten concentrate, 32,-34, tons of mined copper from Northparke, 19,-25, tons of mined copper and 16,-17,5 tons of mined cobalt from Tenke. The output of niobium and phosphate in Brazil is expected to be stable in 218. The production capacity of all mines of the Company remains unchanged in 218 as the Company does not have any expansion plans currently. Hence, the output of mining products will mainly be impacted by ore grade mined in 218. The output plan of all mining products has generally remained at the same level compared to that of 217. The production of all mines was stable in the first half of 218 and output was generally in line with the plan. We maintain mining output assumptions unchanged. Revise down the TP of the Company to HK$ 2.95 and maintain "Neutral". The Company enjoys great advantages due to its low production costs. The successful acquisition of Congo copper-cobalt mine and Brazil niobium and phosphate mining business significantly expanded the Company s mineral resources and raised its profitability. The Company s production is stable and the mining output of acquired overseas assets is expected to remain stable in 218. We revise up molybdenum and tungsten price assumptions due to tight supply and we maintain other metal price assumptions unchanged. Generally speaking, metal prices are expected to stay high in 218, which is positive to lift profitability of the Company. We expect the Company to benefit greatly from the prevalence of electric vehicles, which will lead to huge consumption growth of cobalt. We are optimistic about the future growth of electric vehicles and the consumption demand for cobalt in lithium batteries. We maintain mining output assumptions of the Company unchanged, as the production of the Company was stable in the first half of 218 and the Company generally fulfilled its output target. The successful issuance of A-shares will significantly reduce the debt burden of the Company and support its future development. We believe the PE valuation level of the Company has become reasonable after the retreat over the past 3 months. Hence, we revise down the TP of the Company to HK$ 2.95 to reflect the new PE valuation level, which is equivalent to 8.5x FY18 PE, and maintain "Neutral". See the last page for disclaimer Page 3 of 6

4 Table-1: Peers Comparison Company Stock Code Currency Price PE (fiscal year) PB (fiscal year) ROE(%) 17A 18F 19F 2F 17A 18F 19F 2F 18F International- Listed companies Bhp Billiton Plc BLT LN GBp 1, Vale Sa-Pref VALE5 BZ BRL #N/A N/A n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a Rio Tinto Plc RIO LN GBp 3, Anglo American Plc AAL LN GBp 1, Freeport-Mcmoran Inc FCX US USD Southern Copper Corp SCCO US USD Grupo Mexico Sab De Cv-Ser B GMEXICOB MM MXN Simple Average Weighted Average China - Listed companies Western Mining Co -A CH CNY Tongling Nonferrous Metals-A 63 CH CNY Yunnan Copper Co Ltd-A 878 CH CNY Shenzhen Zhongjin Lingnan-A 6 CH CNY Simple Average Weighted Average HK - Listed companies Aluminum Corp Of China Ltd-H 26 HK HKD Jiangxi Copper Co Ltd-H 358 HK HKD Mmg Ltd 128 HK HKD China Molybdenum Co Ltd-H 3993 HK HKD Zijin Mining Group Co Ltd-H 2899 HK HKD Simple Average Weighted Average See the last page for disclaimer Page 4 of 6

5 Financial Statements and Ratios Income Statement Year end 31 Dec (RMB m) 216A 217A 218F 219F 22F Total Revenue 6,95 24,148 26,468 27,362 27,921 Cost of Sales (4,624) (15,212) (16,763) (17,441) (17,915) Gross profit 2,326 8,936 9,75 9,921 1,6 Selling & Distribution Expenses (91) (215) (192) (186) (175) Administrative Expenses (715) (1,159) (1,273) (1,237) (1,179) Financial costs (48) (1,417) (799) (88) (822) Others (362) (768) (683) (614) (56) Operating Profit 751 5,377 6,758 7,76 7,27 Other income Other expenses (28) (34) (36) (38) (4) Profit Before Tax 1,19 5,382 8,466 8,685 8,729 Income Tax (171) (1,786) (1,648) (1,692) (1,7) profit After Tax 1,19 3,596 6,818 6,994 7,29 Non-controlling Interest (21) (868) (1,131) (1,159) (1,164) Shareholders' Profit / Loss 998 2,728 5,687 5,835 5,865 Basic EPS Cash Flow Statement Year end 31 Dec (RMB m) 216A 217A 218F 219F 22F Sales of goods 7,645 24,594 26,472 27,365 27,924 Other operating activities Cash payed for purchase of goods (4,79) (13,56) (16,763) (17,441) (17,915) Tax payed (679) (2,4) (1,648) (1,692) (1,7) change of working capital (397) (1,274) (2,192) (381) (261) Cash from Operating Activities 2,915 8,429 6,491 8,536 8,79 Investment activities (24,335) 2,466 (7,537) 1,326 1,429 Capital expenditure (854) (1,66) (3,386) (3,47) (3,427) Others (99) (332) (34) (35) (36) Balance Sheet Year end 31 Dec (RMB m) 216A 217A 218F 219F 22F Long-term equity investment 1,191 1,136 1,17 1,26 1,242 PPE 27,968 25,185 31,242 32,249 33,192 Inventory 4,27 4,352 4,439 4,528 4,618 Intangible assets 24,51 21,536 21,213 2,895 2,582 Other non-current assets 1,191 6,579 6,739 6,97 7,82 Total Non-current Assets 68,121 58,788 64,84 65,785 66,715 Cash & Cash Equivalents 9,97 26,59 13,234 14,228 16,753 Held-for-trading financial assets 56 Trade Receivables 3,896 5,453 6,43 6,81 7,174 Inventory 5,83 5,76 6,617 6,84 6,98 Other current assets 799 1,382 1,41 1,438 1,467 Total Current Assets 19,83 39,49 27,664 29,37 32,374 Total Assets 87,924 97,837 92,467 95,92 99,89 Short-term borrowings 4,372 1,478 6,663 5,967 6,499 Held-for-trading financial liabilities 2,821 3,592 3,88 3,998 4,198 Trade payables 3,494 3,564 3,161 3,173 3,164 Other current liabilities 5,293 4,869 5,35 5,615 5,894 Total Current Liabilities 15,982 13,53 18,982 18,754 19,755 Long-term borrowings 23,377 22,34 13,234 14,228 15,357 Bond payable 2, 2, 2,7 3, 3,2 Other non-current liabilities 12,229 14,391 9,354 8,419 7,577 Total Non-current Liabilities 37,66 38,425 25,288 25,647 26,134 Total Liabilities 53,587 51,928 44,27 44,41 45,888 Total Shareholders' Equity 18,738 38,157 4,432 42,766 45,112 Minority Interest 15,599 7,752 7,765 7,925 8,89 Total Equity 34,337 45,99 48,197 5,691 53,21 Cash from Investing Activities (26,98) 1,68 (1,957) (2,115) (2,34) [Table_FinancialRatio] Financial Ratios Issue of stocks 17,859 Year end 31 Dec 216A 217A 218F 219F 22F Net bank borrowing change 27,27 1,7 (2,914) 598 1,86 Interest&Dividend Paid (1,18) (2,147) (4,212) (4,39) (4,341) Others (2,171) (9,346) (1,682) (1,716) (1,75) Cash from Financing Activities 23,991 7,372 (8,88) (5,427) (4,231) Net Changes in Cash 88 16,869 (13,275) 994 2,525 Cash at Beg of Year 8,982 9,97 26,59 13,234 14,228 Foreign exchange rate changes 181 (33) Cash at End of Year 9,97 26,59 13,234 14,228 16,753 Gross Margin 33.5% 37.% 36.7% 36.3% 35.8% Net Margin 1.8% 22.3% 25.5% 25.9% 26.% ROE 5.5% 9.6% 14.5% 14.% 13.3% ROA 1.7% 2.9% 6.% 6.2% 6.% ROCE 1.6% 29.2% 36.% 35.8% 35.2% Free cashflow(mn) -21,42 1,895-1,46 9,863 1,219 Net Gearing 57.8% -2.2% 19.4% 17.7% 15.6% Source: the Company, Guotai Junan International. [Table_CompanyRatingDefinition] See the last page for disclaimer Page 5 of 6

6 Company Rating Definition The Benchmark: Time Horizon: 6 to 18 months Rating Hong Kong Hang Seng Index Definition Buy 买入 Relative Performance>15%; or the fundamental outlook of the company or sector is favorable. Accumulate 收集 Relative Performance is 5% to 15%; or the fundamental outlook of the company or sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the company or sector is neutral. Reduce 减持 Relative Performance is -5% to -15%; or the fundamental outlook of the company or sector is unfavorable. Sell 卖出 Relative Performance <-15%; or the fundamental outlook of the company or sector is unfavorable. [Table_IndustryRatingDefinition] Sector Rating Definition The Benchmark: Time Horizon: 6 to 18 months Rating Hong Kong Hang Seng Index Definition Outperform 跑赢大市 Relative Performance>5%; or the fundamental outlook of the sector is favorable. Neutral 中性 Relative Performance is -5% to 5%; or the fundamental outlook of the sector is neutral. Underperform 跑输大市 Relative Performance<-5%; Or the fundamental outlook of the sector is unfavorable. DISCLOSURE OF INTERESTS (1) The Analysts and their associates do not serve as an officer of the issuer mentioned in this Research Report. (2) The Analysts and their associates do not have any financial interests in relation to the issuer mentioned in this Research Report. (3) Except for KAISA GROUP (1638 HK),GUOTAI JUNAN I (1788 HK),BINHAI INVESTMENT (2886 HK),VALUE A SHARE (395 HK),GFI MSCI A I (3156 HK),CAM SCSMALLCAP (3157 HK),MR CSI3 ETF-R (CNY) (83127 HK),GFI MSCI A I-R (CNY) (83156 HK),Guotai Junan and its group companies do not hold equal to or more than 1% of the market capitalization of the issuer mentioned in this Research Report. (4) Guotai Junan and its group companies have not had investment banking relationships with the issuer mentioned in this Research Report within the preceding 12 months. (5) Guotai Junan and its group companies are not making a market in the securities in respect of the issuer mentioned in this Research Report. (6) Guotai Junan and its group companies have not employed an individual serving as an officer of the issuer mentioned in this Research Report. There is no officer of the issuer mentioned in this Research Report associated with Guotai Junan and its group companies. DISCLAIMER This Research Report does not constitute an invitation or offer to acquire, purchase or subscribe for securities by Guotai Junan Securities (Hong Kong) Limited ("Guotai Junan"). Guotai Junan and its group companies may do business that relates to companies covered in research reports, including investment banking, investment services, etc. (for example, the placing agent, lead manager, sponsor, underwriter or invest proprietarily). Any opinions expressed in this report may differ or be contrary to opinions or investment strategies expressed orally or in written form by sales persons, dealers and other professional executives of Guotai Junan group of companies. Any opinions expressed in this report may differ or be contrary to opinions or investment decisions made by the asset management and investment banking groups of Guotai Junan. Though best effort has been made to ensure the accuracy of the information and data contained in this Research Report, Guotai Junan does not guarantee the accuracy and completeness of the information and data herein. This Research Report may contain some forward-looking estimates and forecasts derived from the assumptions of the future political and economic conditions with inherently unpredictable and mutable situation, so uncertainty may contain. Investors should understand and comprehend the investment objectives and its related risks, and where necessary consult their own financial advisers prior to any investment decision. This Research Report is not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject Guotai Junan and its group companies to any registration or licensing requirement within such jurisdiction. 218 Guotai Junan Securities (Hong Kong) Limited. All Rights Reserved. 27/F., Low Block, Grand Millennium Plaza, 181 Queen s Road Central, Hong Kong. Tel.: (852) Fax: (852) Website: See the last page for disclaimer Page 6 of 6