Reiterated CMOC (3993) Buy rating, based on its H-share discount to fundamental factors A large and robust share price
CMOC (3993, $ 5.47) announced satisfactory interim results, annual profit rose 66 percent to 1 billion yuan (earnings per share 0.198 yuan). Comments: Earnings including 282 million yuan of investment income from the sale of Kun-mining brings. Unless write-recurring items such as earnings should rise 29.4% year-to 711 million yuan, which is equivalent to the Bank's full-year earnings forecast of about 47 percent before.
Although the price of molybdenum and tungsten prices were down 13 percent average annual and 8% in the first half, the turnover of molybdenum tungsten related products rose 5.5 percent based upon, due to both increased sales by 19% and 8% respectively. On the other hand, the company surprises in terms of cost control. Unit cash cost of production of tungsten and molybdenum fell 7% and 14% respectively in the period, compared with company guidelines before both levels low. Tungsten and molybdenum production company in the first half reached 50.9% and the company's annual production target of 52.1%, so the Bank is confident the company can easily complete its annual production plan (ie, annual molybdenum and tungsten metals fell 10 percent year-liter twenty four%). The company in the first half of this year included the newly acquired Australian Northparkes mine (NPM), the contribution of the mine during the turnover of 1.08 billion yuan (or 29% of the overall turnover) and gross profit of 498 million yuan (the total gross 40%). Smooth operation of the mine, unit cash costs in the low $ 0.53 per pound, compared with the company's guidance before a low 24 percent. Thus, while copper prices fell 9 percent annual gross margin remained at 49.3% copper concentrate a high level, showing a high level of management and operational efficiency of the mine. Benefit from the contribution of the mine, the overall gross margin expanded from 32.1% last year to 37.0 percent in the first half of the first half of the year.
Los molybdenum since the Bank April 11 promotion has surged 50.3%, mainly due to the company's share price relative to A-shares at a discount, and the company was fundamentally sound. After the stock surged, price was still 42 percent discount to A shares. Therefore, we believe the arbitrage opportunity is still there. In terms of fundamentals, coincides with the summer season, molybdenum prices are still low levels. However, the State Reserve Bureau has recently bought 2,700 tons of molybdenum oxide, reflecting the policy of the industry is still supported, therefore molybdenum prices should be a defensive force. Bank of copper in the second half of 2014 the trend has become more optimistic, primarily due to the Sino-US economic improvement and increased investment in the power grid and other infrastructure will drive more demand for copper products.
To reflect the proceeds from the sale of assets and administrative costs lower than expected, the Bank has been adjusted earnings forecast to 1.829 billion yuan (earnings per share 0.36 yuan). The company is equivalent to 12.1 times 2014 price-earnings ratio, market, and market-book ratio of 1.7 times, the average terms of the past three years, the valuation is not cheap. However, based on the A-share price discount to remain relatively large, we believe the company's stock price remain upside. Meanwhile, considering the company through the purchase of overseas assets, so successful portfolio diversification, and overseas M & A activity yet to come, with the state-owned private enterprises turn brought efficiency gains, we believe a higher valuation also Luomu is reasonable. Therefore, the Bank reiterated Buy rating Luo molybdenum, target price raised to 6.2 yuan, a considerable 14 times in 2014 and 1.9 times the rate of market surplus market account rates in 2014
