FIRST SHANGHAI maintains a "buy" rating on ZHAOJIN MINING (01818) with a target price of HK$17.39.

FIRST SHANGHAI has released a research report, maintaining a "Buy" rating on ZHAOJIN MINING (01818), with predicted net profits attributable to the parent company of 12.5/19.8/27 billion RMB for the years 2024-2026. Based on the high gold prices and the continuous release of the company's future gold production capacity, the target price of the company has been adjusted to 17.39 Hong Kong dollars. The company possesses extremely excellent gold resources and the potential for increased exploration and production of offshore gold mines, providing continuous growth for the company in the future. In addition, the company's synergy with Zijin will further optimize resource allocation. Key points by FIRST SHANGHAI include: Significant growth in performance driven by increased production and prices: In the first half of 2024, the company achieved total revenue of 4.627 billion RMB, a year-on-year increase of 34.24%; achieving a net profit attributable to the mother of 0.553 billion RMB, a year-on-year increase of 118.62%. The growth in revenue can be attributed to the increase in gold production and the impact of rising gold prices. The company's gold production in the first half of the year increased to 13.18 tons, a year-on-year increase of 12%, with self-produced gold at 9 tons, a year-on-year increase of 6.9%, and smelted gold at 4.18 tons, a year-on-year increase of 24.8%; in addition, the company's cost control is significant, with a year-on-year decrease of 4.7 yuan in gold cost per gram, and the gross profit margin in the first half of the year increased by 3.72 percentage points. Gold prices are expected to continue to rise: With the expectation of a rate cut by the Federal Reserve and central banks around the world continue to buy gold, gold prices have continued to rise in the first half of the year. As of the end of June, the closing price of spot gold in London was $2,322.7 per ounce, with an increase of over 13% since the beginning of the year, breaking through the $2,300 per ounce mark. The closing price of Au9999 on the Shanghai Gold Exchange was 549.88 yuan per gram, an increase of 14.4% since the beginning of the year. It is expected that gold prices will remain at a high level in the future, providing stable support for the company's performance. Huge growth potential in both domestic and overseas markets: In the first half of the year, the company completed the full acquisition of Tietuo, expanding its presence in overseas markets and contributing profits from consolidation starting in June. The production cost of Tietuo's gold is similar to the industry standard, with gold reserves of over 40 tons and annual production expected to reach 4-5 tons. Previously, the company acquired 70% of the equity of Ruihai Mining, successfully acquiring China's largest single gold mine - the offshore gold mine. According to JORC standards, the offshore gold mine has a total of 562.37 tons of confirmed+controlled+inferred gold resources, with mineable gold reserves of 212.21 tons. It is currently the largest single gold mine in China, with an average gold grade of 4.42 grams per ton, representing extremely excellent gold resources. The project is steadily progressing, with trial drilling expected to begin in 2024 and production reaching 15 tons by 2027. The company's projects at home and abroad are progressing orderly and the growth potential is huge, which is expected to drive stable and rapid growth in performance in the future.