Huaan Securities: molybdenum price upward boost performance gold molybdenum shares 2021H1 profit improvement

In the first half of the year, 2021H1 realized operating income of 3.772 billion yuan, year-on-year-7.11%; net profit of 241 million yuan, + 90.77%; and deduction of non-return net profit of 228 million yuan, + 103.63% of the same period last year.

From the perspective of the second quarter, the company Q2 achieved operating income of 2.135 billion yuan (year-on-year + 2.29% / month-on-month + 30.44%), net profit of 168 million yuan (year-on-year + 242.03% / month-on-month + 130.36%), and non-return net profit of 160 million yuan (year-on-year + 306.60% / month-on-month + 137.03%).

The simultaneous increase in volume and price will boost the performance and strive to improve the profitability of the trading business.

1) in terms of price, the market demand has warmed up after the relief of the epidemic, and molybdenum prices at home and abroad have risen sharply due to tight supply of molybdenum ore and insufficient inventory. According to MW data, the average price of molybdenum oxide in the first half of the year was 12.74 US dollars per pound of molybdenum, up 40.31 percent from the same period last year, while the average price of ferromolybdenum was 1.84 million yuan per ton, up 13.85 percent from the same period last year

2) in terms of production and sales, the company seizes the market opportunity of the sharp rise in molybdenum prices, strengthens the interaction between production and marketing, and improves the sales volume of molybdenum products to boost revenue growth. During the reporting period, the sales of ferromolybdenum, molybdenum disulfide, molybdenum powder and molybdenum sheet products increased by 7.3%, 10.5%, 42.0% and 46.3% respectively compared with the same period last year, and the total operating volume of molybdenum products completed 115% of the annual plan.

3) the company pays attention to adjusting the structure of trade business and vigorously improves the profitability of trade business. In the first half of the year, the company completed its annual trade profit target of 185%, up 349% from the same period last year.

Rely on high-quality mine resources, lay out the whole molybdenum industry chain, and create leading enterprises in the molybdenum industry.

Gold and Molybdenum Co., Ltd. is the largest molybdenum company in Asia, the third in the world and the leading company in the world, with a complete industrial chain from molybdenum mining, mineral processing, smelting, chemical industry to metal processing. The company has a significant advantage in resource endowment, and controls two high-quality mine resources, Jinduicheng Molybdenum Mine and Ruyang Donggou Molybdenum Mine, with a total molybdenum metal amount of 1.46 million tons. The mine produces a total of about 23000 tons of molybdenum every year, and the production capacity is expected to remain stable. In addition, the company's stake in the Jide molybdenum mine is in the construction stage, if the project is successfully put into production, the capacity is expected to expand. At present, the company's products account for 25% of China's molybdenum market share and 12% of the world molybdenum market share.

The tight balance between supply and demand supports the molybdenum price, and the company is expected to continue to benefit.

In the context of the gradual relief of the epidemic and the accelerated recovery of the global economy, consumer sectors such as alloy steel and stainless steel are gradually released, driving the overall demand of the molybdenum market is growing steadily. 2021H1's domestic production of alloy steel was 20.53 million tons, an increase of 14.19% over the same period last year, while the output of stainless steel crude steel was about 16.9064 million tons, an increase of 28.51% over the same period last year. At present, the demand heat of the downstream is not reduced, while the domestic molybdenum supply is in short supply, and the import of raw materials is narrowed under the superimposed high overseas molybdenum price. we expect the tight situation of supply and demand in the domestic molybdenum market to be difficult to change in the short term, and the molybdenum price remains high. The company mainly deals in molybdenum series products, which is expected to benefit from the persistently high molybdenum price and increase the profitability of molybdenum business.

Investment suggestion

The company is a leading molybdenum manufacturer at home and abroad, high-quality ore resources cast the advantage of scale, in the current upward trend of molybdenum prices, the company's profitability is expected to improve. We estimate that the company's revenue score from 2021 to 2023 will be 83.45 billion yuan, with an increase of 10.1%, 7.4%, 7.6%, and the corresponding net profit will be 4.59, 5.53, 620 million yuan, respectively, an increase of 152.0%, 20.5%, 12.2%, respectively, compared with the same period last year. The current share price corresponds to a "buy" rating of 62X PE 52X Universe 46X.

Risk hint

The downstream demand is not as expected, the molybdenum price fluctuates violently, and the epidemic situation repeatedly affects the mine production and so on.