SDR(000603) Guoxin Securities·2025-01-21 13:49Investment Rating - The report assigns an "Outperform" rating to the company for the first time, with a reasonable valuation range of 15.70 - 16.90 CNY, indicating a premium of 16% to 25% over the current stock price of 13.66 CNY [6][4]. Core Views - The company is a significant player in the domestic silver market, focusing on expanding its precious metals segment, particularly silver and gold [1][16]. - The company has a robust mineral resource base, with silver reserves of 7,231 tons and gold reserves of 27 tons as of the end of 2023 [1][16]. - The company is actively pursuing acquisitions to strengthen its position, including a recent acquisition of a 53% stake in Honglin Mining, which is expected to enhance gold production significantly by 2025 [2][17]. - The completion of technical upgrades at Jinshan Mining is anticipated to mark a turning point for the company's performance, with a commitment from the controlling shareholder to ensure a minimum net profit of 4.7 billion CNY from Jinshan Mining over the next three years [3][4]. Company Overview - The company has been expanding through acquisitions since its establishment, currently controlling six mining subsidiaries in Inner Mongolia and one copper-gold mine in Sichuan [1][16]. - The company’s main products include silver ingots, gold, and lead-zinc concentrates, with a focus on maintaining high profit margins through resource and processing advantages [27][31]. - The company’s financial performance has been impacted by technical upgrades and market conditions, with a significant drop in net profit in 2023, but a strong recovery is expected in the coming years [3][4][27]. Financial Forecast and Valuation - The company is projected to achieve net profits of 3.2 billion CNY, 5.3 billion CNY, and 7.3 billion CNY for the years 2024, 2025, and 2026, respectively, reflecting substantial growth rates of 115.4%, 66.7%, and 37.4% [4][5]. - Earnings per share (EPS) are expected to increase from 0.46 CNY in 2024 to 1.06 CNY in 2026 [4][5]. - The company’s revenue is forecasted to grow from 2.35 billion CNY in 2024 to 3.73 billion CNY in 2026, driven by increased production capacity and favorable market conditions [5][4]. Industry Insights - The silver market is expected to experience high volatility, influenced by industrial demand, particularly in the photovoltaic sector, which has seen rapid growth [37][48]. - The report highlights that silver's industrial demand is projected to grow significantly, with a forecasted increase of 9% in 2024, driven by applications in electronics and solar energy [51][48]. - The supply-demand dynamics for silver are tightening, with a projected supply deficit of 6,697 tons by 2025, which may enhance price sensitivity to market changes [51][53].