JCHX MINING MANAGEMENT(603979)：COPPER MINE PROJECTS GRADUALLY START OPERATION;SERVICE AND RESOURCES DUAL-DRIVER STRATEGY PAYING OFF

　　2022 and 1Q23 results largely in line with our expectations
　　JCHX Mining Management (JCHX) announced its 2022 results: Revenue rose 18.9% YoY to Rmb5.36bn, attributable net profit grew 29.5% YoY to Rmb610mn, and recurring net profit grew 34.2% YoY to Rmb613mn. In 4Q22, revenue increased 20.7% YoY and 6.0% QoQ to Rmb1.48bn, attributable net profit rose 41.8% YoY to Rmb168mn, and recurring net profit rose 64.0% YoY to Rmb172mn. Both the 2022 and 1Q23 results were in line with our expectations. We attribute the YoY earnings growth to the firm’s market expansion and rising revenue from its mine development service business.
　　The firm also announced its 1Q23 results: Revenue rose 29.2% YoY but fell 0.3% QoQ to Rmb1.48bn, and attributable net profit rose 16.5% YoY and 10.1% QoQ to Rmb185mn. The firm’s 1Q23 earnings maintained solid growth thanks to continued expansion in the mine operation services market.
　　Trends to watch
　　A leader in integrated mine operation services, JCHX has a dual-driver strategy focused on services and resources. JCHX is a leading domestic provider of mine operation services, with a comprehensive mining service offering. The firm has been exploring a dual-driver business model focusing on services and resources through the acquisition of high-quality mining resource projects. This strategy has allowed the company to transform from a single mine development service provider to an integrated mining company.
　　Expansion of mining services business has paid off and is likely to continue to drive steady earnings growth. In 2022, the company concentrated on expanding its presence in both domestic and overseas markets, and its efforts have yielded positive results. The number of its mining service projects increased to 40 in 2022 from 32 in 2021, with revenue contribution from the overseas business rising to 62%.
　　Thanks to its technological expertise and extensive experience in mine development services, we believe that the firm has gained a strong reputation overseas and fostered robust business relationships. As a result, we expect the company’s expansion into overseas markets to drive steady earnings growth in the mining services business segment in the future.
　　The Dikulushi mine has started operation, and the firm expects the Lonshi mine to come online in 2023. According to the firm’s announcement, the company’s mines are gradually coming online:
　　Dikulushi copper mine: JCHX expects this mine, which is in the Democratic Republic of the Congo (DRC) and which came online in 2022, to produce 8,000t of copper in 2023.
　　Lonshi copper mine: The firm expects this mine, which is also in the DRC, to come online at end-2023 with copper capacity of 40,000t/yr.
　　Liangchahe phosphate mine: JCHX has a 90% stake in this mine in China. The firm expects Phase I (300ktpa) to commence operation in 2023, with Phase II (500ktpa) to come online in 2025.
　　Cordoba Minerals: JCHX holds a 59.99% share of Cordoba Minerals’ project in Colombia. The firm expects the project has an annual production capacity of 31,000t of copper and 1.7t of gold. The firm has preferential mining service rights and preemptive rights to the mine, which is scheduled to start production after 2025.
　　We believe JCHX’s dual-driver strategy of mine service and resources will start to pay off, likely accelerating earnings growth.
　　Financials and valuation
　　We keep our 2023 and 2024 earnings forecasts unchanged. The stock is trading at 19.5x 2023e and 10.5x 2024e P/E. We maintain an OUTPERFORM rating and TP of Rmb42, implying 24.2x 2022e P/E and 13.1x 2023e P/B, offering 24.5% upside.
　　Risks
　　Volatile metal prices; negative surprises in project operation commencement; political risks in countries where overseas projects are located.
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   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。