Investment Positives - Tongguan Gold Group is initiated with an OUTPERFORM rating and a target price of HK$3.52, driven by expertise in gold exploration and strong organic growth momentum [1] - The company has a total of 55.0 tons of gold reserves with an average ore grade of 8.26g/t, expecting gold sales volume to reach 2.8 tons in 2025 and 3.4 tons in 2026 as mining permits progress [1] Cost Management - Tongguan Gold acquired Xi'an Hongshang, a mining service provider, in January 2025, which is expected to help reduce production costs through value chain consolidation [2] Strategic Investments - Zijin Mining acquired a 3.82% stake in Tongguan Gold for US$25 million, indicating recognition of Tongguan's asset quality and strategic direction [2][3] - The partnership is anticipated to enhance cash flow and may lead to potential M&A transactions to further boost growth [3] Market Conditions - A decline in effective interest rates and the People's Bank of China's (PBoC) expected continuation of gold purchases are likely to support gold price increases [4][5] - The PBoC resumed gold purchases in November 2024, which may lead to further increases in gold acquisitions [5] Financial Projections - Forecasted EPS for Tongguan Gold is HK$0.16 in 2025 and HK$0.23 in 2026, representing a CAGR of 121% from 2024 to 2026 [6] - The stock is currently trading at 17.3x 2025e and 11.6x 2026e P/E, with a target price implying a 30% upside [6]
TONGGUAN GOLD GROUP(00340.HK)：PERSISTENT EFFORTS IN EXPLORING AND INCREASING GOLD RESERVES;STRONG MOMENTUM OF ORGANIC GROWTH AND EXTERNAL EXPANSION