CCB International: Shandong Gold Mining (01787) rated "outperform the market", target price raised to HK$22.4.

Industrial Bank International released a research report saying that Shandong Gold Mining (01787) has a "outperform the market" rating, with the target price raised from HK$22.1 to HK$22.4, believing that the valuation is attractive. The company's performance last year fell below expectations, with preliminary estimates of a year-on-year increase in net profit of 16% to 37%, reaching RMB 2.7 to 3.2 billion, lower than the market expectation of RMB 4.3 billion. However, due to the stable growth in gold production, the company's profit margin expanded due to the rise in gold prices, and the volume of gold production increased by 12%, moving towards the company's production target. Overall, the company's performance last year was satisfactory. The bank raised the gold price forecast for the next two years by 3% and 5% respectively, to $2,850 and $2,980 per ounce. The demand for gold as a safe haven has boosted gold demand, and central bank net purchases also support gold prices. As the leading gold mining company in mainland China, Shandong Gold Mining had a market share of about 20% last year and is expected to benefit from the rise in gold prices. However, considering asset injections and production delays, the bank lowered Shandong Gold Mining's production forecasts for the next two years by 6%. The bank expects that Shandong Gold Mining's production in the next two years will increase year-on-year by 15% and 10%, and the gross profit margin from 2024 to 2026 is expected to be 16.6%, 18.8%, and 18.5% respectively, slightly higher than the original forecasts. Due to the increase in minority shareholders' equity and the normalization of tax rates, earnings forecasts for the next two years have been reduced by 17% and 16%. However, the bank still expects Shandong Gold Mining's net profit to increase by 73% to RMB 5.1 billion this year, which is 6% lower than market expectations.