JCHX MINING MANAGEMENT(603979)：EARNINGS GROWTH RISES IN 2Q23; “MINING SERVICES + RESOURCES” STRATEGY PAYS OFF

　　1H23 results in line with our expectations
　　JCHX Mining Management announced its 1H23 results: Revenue rose 32.3% YoY to Rmb3.28bn. Net profit attributable to shareholders grew 36.4% YoY to Rmb402mn, translating to fully diluted EPS of Rmb0.67, in line with our forecasts.
　　In 2Q23, revenue increased 34.96% YoY （22.15% QoQ） to Rmb1.80bn, and net profit attributable to shareholders rose 59.48% YoY （17.61% QoQ） to Rmb217mn. We attribute the strong YoY and QoQ earnings growth to higher revenue from mining service business and the start of the sale of mineral products.
　　Trends to watch
　　A leading provider of integrated mine operation services with a "service + resource" strategy. JCHX is a leading provider of comprehensive mine operation services in China. Through the acquisition of high-quality mine resources, the firm has developed a dual-driver model, with growth driven by mine development services and resource development at the same time. This helped JCHX transform from a mine development service company to a mining group. The firm began selling mineral products in 2Q23 as part of its "services + resources" strategy.
　　Maintains steady growth of mining services, boosting earnings. In 1H23, mining services revenue rose 22.93% YoY, accounting for 91.38% of total revenue. Revenue from overseas mining services grew 19.68% YoY, making up 61.55% of mining service revenue. Thanks to its technological strength and construction experience in mine development services, the firm has established a strong reputation and high client stickiness overseas. We expect its overseas expansion to boost earnings from mining services.
　　D mine turned profitable; L mine to start operation soon. Mines are gradually put into operation. JCHX announced that the Dikulushi copper mine in the Democratic Republic of Congo （DRC） produced 3,200t of copper equivalents in 1H23, and sold 3,300t （incl. inventory from last year）。 JCHX plans to produce 8,000t copper equivalents in 2023. The Lonshi copper mine in DRC started capacity ramp-up, and surface processing and smelting plants began trial operation.
　　JCHX expects the mine to start operation by end-2023 with copper　　capacity of 40,000t/yr. Phase I of the domestic Liangchahe phosphate mine （300,000t/yr） came online, and the Phase II project （500,000t/yr） is scheduled to begin operating in 2025. The firm’s pre-feasibility study states that Colombia Cordoba Minerals （JCHX holds a 59.99% stake） will likely produce 31,000t of copper and 1.7t of gold p.a. JCHX has a preemptive right to serve the project and purchase equity. The firm expects the project to start production after 2025. We believe the firm's earnings growth will accelerate progress of its services + resources strategy progresses.
　　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 OUTPERFORM and our target price of Rmb42 （implying 24.2x 2023e P/E and 13.1x 2024e P/B）， offering 24.4% upside.
　　Risks
　　Volatile product prices; disappointing project operation; 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。