1H22 results in line with our forecast
In 1H22, attributable net profit jumped 89.95%. 1H22 revenue rose 20.57% YoY to Rmb132bn and attributable net profit grew 89.95% YoY to Rmb12.6bn. The company achieved revenue of Rmb67.7bn in 2Q22 ( +8.54% YoY) and net profit of Rmb6.5bn ( +57.23% YoY). This is in line with our forecast.
Trends to watch
Accelerates progress towards becoming global mining leader. Prices and volume of main products increased in 1H22, and profitability hit a record high. In 1H22, production of copper, gold, zinc, silver rose 70%, 23%, 3%, and 10%, while production of iron fell 26% YoY. The prices of copper, gold, and zinc rose 4%, 2%, and 28%, while the prices of silver and iron fell 11% and 4% YoY. In addition, key projects achieved milestone breakthroughs. Lithium: The 3Q salt lake began the first phase of brine extraction and trial production in June, while the Laguocuo salt lake and Xiang Yuan lithium mine construction is also progressing well. Gold: The Norton Goldfield Binduli North project was put into operation on June 28, and we expect Norton “complex gold ore project” and Shanxi Zijin mine to contribute to 2023 gold output. Third, we expect Zijin’s long-term lithium resources to enter the world’s top 10. Upon the completion of the Xiang Yuan lithium mine acquisition, we believe Zijin's self-described “two lakes and one mine” strategy will have taken shape and we expect its equity lithium resources to reach 11.86mnt LCE. We expect Zijin’s lithium production capacity to exceed 150kt LCE upon the completion of all construction of the three projects.
Financials and valuation
We maintain OUTPERFORM on A- and H-shares and our earnings forecast. Considering lower sector valuations, we lower our A-share target price by 7% to Rmb12.60. The current A-share price corresponds to 10.4x and 9.7x 2022e and 2023e P/E. The target price corresponds to 14.5x and 13.5x 2022e and 2023e P/E, offering 39.5% upside. We lower our H-share target price by 7% to HK$12.90. The current H-share price corresponds to 9.2x and 8.6x 2022e and 2023e P/E. The target price corresponds to 12.7x and 11.9x 2022e and 2023e P/E, offering 38.9% upside.
Risks
Fed policy uncertainty; global copper and zinc supply exceeds expectations; projects expand slower than we expect.