Company Report: Sinotrans Shipping (00368 HK) - 国泰君安

Company Report: Xinxin Mining (03833 HK) Kevin Guo 郭勇
公司报告:新鑫矿业 (03833 HK)
+86 755 23976671
kevin.guo@gtjas.com
Profitability eroded by the slump of Nickel Prices, Downgrade to “Reduce”
镍价下跌侵蚀盈利能力,下调至“减持”
� The 2012 interim results of Xinxin Mining are expected to slide
significantly mainly due to the slump of nickel prices. The sales prices of
nickel dropped by 29% yoy to RMB 113,392/t and the sales prices of copper
dropped by 18.0% yoy to RMB 49,647/t.
� We expect the output of mined nickel and copper of the Company to
increase steadily in 2012-2014 with the growth of mining capacities. Both
Kalatongke Mine and Yakes & Hami have expansion projects under
construction, and the output of mined nickel and copper are expected to
increase in accordance with mining capacities.
� Nickel prices are under great pressure of long-term over supply and
short-term global economy slowdown, and remain the largest risk of the
Company. We expect the 2012 average nickel prices to drop by 22% to RMB
125,000/t.
� Revise down the target price of Xinxin Mining to HK$ 1.35 due to lower
EPS estimation, and downgrade the investment rating to “Reduce”.
� 由于镍价大幅下挫,预计新鑫矿业 2012 年上半年业绩将显著下跌。上半年公司镍销售均
价同比下跌 29%至 113,392 元/吨,铜销售均价同比下跌 18.0%至 49,647 元/吨。
� 我们预计公司 2012-14 年矿产镍和矿产铜的产量将会随着采矿能力的上升而稳步增长。公
司喀拉通客矿和亚克斯&哈密矿都在进行扩产,因此矿产镍和矿产铜的产量将会随着采矿
能力的增长而增长。
� 镍价受制于长期供应过剩以及短期内全球经济增速放缓的压力,是公司经营最大的风险。
我们预计 2012 年镍均价将下跌 22%至 125,000 元/吨。
� 基于较低的盈利预测我们将新鑫矿业的目标价下调至 1.35 港币,并将投资评级下调至“减
持”。
Year End
年结
Turnover
收入
Net Profit
股东净利
EPS
每股净利
EPS
每股净利变动
Rating:
23 July 2012
Reduce
Downgraded
评级: 减持 (下调)
6-18m TP 目标价: HK$1.35
Revised from 原目标价: HK$2.17
Share price 股价: HK$1.510
Stock performance
股价表现
Change in Share Price
股价变动
Abs. %
绝对变动 %
Rel. % to HS index
相对恒指变动 %
Avg. share price(HK$)
平均股价(港元)
See the last page for disclaimer Page 1 of 6
PER
市盈率
BPS
每股净资产
1 M
1 个月
3 M
3 个月
1 Y
1 年
(11.4) (28.5) (65.7)
(11.6) (21.6) (54.7)
1.6 1.8 2.4
Source: Bloomberg, Guotai Junan International.
PBR
市净率
DPS
每股股息
Yield
股息率
ROE
净资产收益率
12/31 (RMB m) (RMB m) (RMB) (△%) (x) (RMB) (x) (RMB) (%) (%)
FY10A 1,125 350 0.158 54.6 7.9 2.577 0.5 0.150 12.0 6.1
FY11A 1,455 190 0.086 -45.8 14.5 2.577 0.5 0.030 2.4 3.3
FY12F 1,506 162 0.073 -14.3 17.0 2.460 0.5 0.026 2.1 3.0
FY13F 1,795 175 0.079 7.7 15.8 2.462 0.5 0.028 2.2 3.2
FY14F
2,194 245 0.111 39.9 11.3 2.472 0.5 0.039 3.1 4.5
Shares in issue (m) 总股数 (m) 2,210.0 Major shareholder 大股东 Xinjiang Nonferrous Group 42.2%
Market cap. (HK$ m) 市值 (HK$ m) 3,359.2 Free float (%) 自由流通比率 (%) 34.34
3 month average vol. 3 个月平均成交股数 (‘000) 1,194.72 FY12 Net gearing (%) FY12 净负债/股东资金 (%) 10.2%
52 Weeks high/low (HK$) 52 周高/低 4.480 / 1.450 FY12 Est. NAV (HK$) FY12 每股估值(港元) 3.4
Source‥The Company, Guotai Junan International.
GTJA Research 国泰君安研究
Xinxin Mining 新鑫矿业 (03833HK)
Company Report

The 2012 interim results of Xinxin Mining are expected to slide significantly mainly due to the slump of nickel prices.
The Company has just released profit warning that the 2012 interim results are expected to slide significantly. Although the
output of refined nickel and copper increased by more than 60% yoy, the profitability of the Company was seriously eroded by
the slump of metal prices. The average 1H2012 LME nickel prices dropped by 27.7% yoy to 18,499 US$/t, while the average
1H2012 LME copper prices dropped by 14.0% yoy to 8,087 US$/t. Domestic metal prices fell more than the LME metal prices,
hence the sales prices of nickel dropped by 29% yoy and the sales prices of copper dropped by 18.0% yoy. We estimate that
total 1H2011 revenue of the company is expected to increase by more than 50%, while net profit is expected to fall down.
Table 1 Output of Xinxin Mining
1H2011 1H2012 YoY 1H2011 1H2012 YoY
Nickel cathode Copper cathode
Output ton 2,720 4,584 68.5% 1,414 3,207 126.8%
Sale ton 2,268 4,353 91.9% 1,120 3,273 192.2%
Average selling prices RMB/t 159,708 113,392 -29.0% 59,104 49,647 -16.0%
Source: The Company, Guotai Junan International.
We expect the output of mined nickel and copper of the Company to increase steadily in 2012-2014 with the growth of
mining capacities. Kalatongke Mine and Yakes & Hami contribute almost all of the mining output of the company, and they all
have expansion projects under construction. The mining capacities of Kalatongke Mine are about 2,000 ton/d right now, and
are expected to reach 3,400 ton/d in 2013. Xinjiang Yakes & Hami are expected to add 4000 ton/d of new capacity and the
total production capacity will reach 5,500 ton/d in 2014. Besides, the upgrading of the smelting and refinery systems had been
completed in 2011 and is able to process the additional ores. As a result, the output of mined nickel and copper are expected
to increase in accordance with the ore output. According to the latest information from the Company, the output of mined nickel
is expected to reach 5,200 t, 7,400t and 10,500 t in 2012-2014, which are remain the same with our previous estimation. More
importantly, output uncertainties have been removed with the completion of expansion project of Kalatongke Mine.
Figure 1 Output of nickel and copper cathode (ton) Figure 2 Nickel prices
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Nickel Copper
2010 2011 2012E 2013E 2014E
250,000
225,000
200,000
175,000
150,000
125,000
100,000
See the last page for disclaimer Page 2 of 6
75,000
50,000
25,000
Source: The Company, Guotai Junan International. Source: Bloomberg, Guotai Junan International.
Nickel prices are under great pressure of long-term over supply and short-term global economy slowdown, and
remain to be the largest risk of the Company. The fundamentals of nickel are the weakest among base metals. The
massive use of nickel pig ore (NPI) in the past few years significantly increased the supply of nickel and changed
supply-demand balance of global nickel market. As a result, nickel prices dropped more than other base metals in the past few
years. We believe nickel is expected to continue to under great pressure of long-term over supply in the next few years.
Besides, global economy slowdown in the near-term adds more pressure over nickel market. We expect 2012 average nickel
prices to drop by 22% to RMB 125,000/t. However, we believe current nickel prices are close to the average industry
production costs and further fall down of nickel prices will drive high costs producers cease production, which helps to support
nickel prices. The operating results of the Company are very sensitive to the fluctuation of nickel prices, we estimate that net
profit of the Company will change by more than 20% when nickel prices fluctuate by 10%.
0
Jan-
09
Jul-
09
Jan-
10
Jul-
10
Jan-
11
Jul-
11
Jan-
12
Jul-
12
23 July 2012
Xinxin Mining 新鑫矿业 (03833)
Company Report

Table2 Sensitivity of nickel prices
Nickel Price Assumptions Net Profit(million)
FY12 FY13 FY14 FY12 FY13 FY14
Base Case 125,000 130,000 130,000 162 175 245
Case1 112,500 117,000 117,000 120 120 166
Change v.s. Base Case -10% -10% -10% -26.3% -31.2% -32.2%
Case2 100,000 104,000 104,000 77 66 87
Change v.s. Base Case -20% -20% -20% -52.5% -62.4% -64.5%
Case3 137,500 143,000 143,000 205 229 323
Change v.s. Base Case 10% 10% 10% 26.3% 31.2% 32.2%
Source: The Company, Guotai Junan International.
Revise down the target price of Xinxin Mining to HK$ 1.35 due to lower EPS estimation, and downgrade the
investment rating to “Reduce”. Although the output of mined nickel and copper is expected to grow steadily in 2012-2014,
nickel prices still confront great pressure and remain the largest risk of the Company. We maintain the 2012-2014 mined
nickel output assumptions, but revised down nickel prices assumptions by 20%. As a result, we revise down EPS for FY12-14
to RMB 0.073, 0.079 and 0.111, down by 45%, 47% and 49%, respectively. We believe nickel prices are close to the average
industrial production costs and the downside extent is limited, so we maintain the valuation level of the Company. Hence we
revise down TP to HK$ 1.35, which is equivalent to 15.0x FY12 PE and 0.6x FY12 PB and downgrade the company’s rating to
“Reduce”.
Table3 Key assumptions of Xinxin Mining
FY12
(Old)
FY12
(New)
Change
(%)
See the last page for disclaimer Page 3 of 6
FY13
(Old)
FY13
(New)
Change
(%)
FY14
(Old)
FY14
(New)
Change
(%)
Sales Volume (tons)
Mined Nikel 5,281 5,281 0% 7,412 7,412 0% 10,523 10,523 0%
Smelted Nickel 3,919 3,919 0% 4,088 4,088 0% 3,077 3,077 0%
Mined Copper 5,365 5,365 0% 7,428 7,428 0% 10,399 10,399 0%
Price (Rmb/ton)
Nickel 156,000 125,000 -20% 160,000 130,000 -19% 160,000 130,000 -19%
Copper 56,000 56,000 0% 58,000 58,000 0% 60,000 60,000 0%
Unit cost (Rmb/ton)
Mined Nickel 70,275 77,956 11% 71,680 79,515 11% 73,114 81,105 11%
Smelted Nickel 128,000 102,564 -20% 131,282 106,667 -19% 131,282 106,667 -19%
Mined Copper 26,586 29,683 12% 27,383 30,574 12% 28,205 31,491 12%
Selling exp./Revenue 0.6% 0.6% 0Pts 0.6% 0.6% 0Pts 0.6% 0.6% 0Pts
G&A/Revenue 7.0% 7.0% 0Pts 6.0% 6.0% 0Pts 6.0% 6.0% 0Pts
Interest rate 6.0% 6.0% 0Pts 6.0% 6.0% 0Pts 6.0% 6.0% 0Pts
Effective income tax 25.0% 25.0% 0Pts 25.0% 25.0% 0Pts 25.0% 25.0% 0Pts
Dividend rate 35.0% 35.0% 0Pts 35.0% 35.0% 0Pts 35.0% 35.0% 0Pts
EPS 0.135 0.073 -45% 0.150 0.079 -47% 0.218 0.111 -49%
Source: The Company, Guotai Junan International.
23 July 2012
Xinxin Mining 新鑫矿业 (03833)
Company Report

Table 3 Xinxin Mining’s Peers Comparison
Company Stock Code Currency Last price
PE PB ROE(%)
11A 12F 13F 14F 11A 12F 13F 14F 12F
Vale Indonesia Tbk INCO IJ IDR 2,675.00 10.3 10.1 8.6 8.6 2.0 1.5 1.4 1.3 15.6
Aneka Tambang Persero Tbk Pt ANTM IJ IDR 1,360.00 8.0 8.2 8.1 9.6 1.4 1.1 1.0 1.0 13.9
Mmc Norilsk Nickel Jsc-Adr MNOD LI USD 16.04 n.a. 7.1 7.0 6.7 n.a. 1.8 1.5 1.2 27.2
Mincor Resources Nl MCR AU AUD 0.62 n.a. 27.0 124.0 38.8 1.1 0.7 0.8 0.8 2.0
Western Areas Nl WSA AU AUD 4.04 7.9 13.1 13.6 8.3 3.7 2.5 2.3 1.9 19.6
Simple Average 811.14 8.7 13.1 32.3 14.4 2.0 1.5 1.4 1.3 15.7
Weighted Average 276.76 1.3 7.6 7.7 7.1 0.3 1.7 1.5 1.3 25.5
Western Mining Co -A 601168 CH CNY 8.24 26.0 12.9 12.9 n.a. 1.9 n.a. n.a. n.a. n.a.
Tongling Nonferrous Metals-A 000630 CH CNY 19.23 16.5 17.7 14.1 12.3 2.4 2.4 2.1 1.9 30.9
Yunnan Copper Industry Co-A 000878 CH CNY 17.45 36.6 25.7 23.7 19.4 3.3 3.2 2.9 2.5 12.6
Shenzhen Zhongjin Lingnan-A 000060 CH CNY 8.70 17.9 16.4 15.8 13.1 3.2 2.7 2.4 2.1 13.8
Simple Average 13.41 24.2 18.1 16.6 14.9 2.7 2.8 2.5 2.1 19.1
Weighted Average 14.22 24.4 18.6 16.8 11.7 2.7 2.2 1.9 1.7 15.7
Aluminum Corp Of China Ltd-H 2600 HK HKD 3.13 137.1 n.a. 214.3 35.2 0.7 0.7 0.7 0.7 (2.8)
Jiangxi Copper Co Ltd-H 358 HK HKD 17.44 7.2 8.0 7.7 8.6 1.2 1.1 1.0 1.0 15.2
Xinjiang Xinxin Mining Ind-H 3833 HK HKD 1.52 19.6 12.9 8.7 5.9 0.7 0.5 0.5 0.5 3.8
China Molybdenum Co Ltd-H 3993 HK HKD 2.75 11.7 11.0 8.9 8.8 1.2 0.9 0.8 0.7 8.9
Hunan Nonferrous Metals-H 2626 HK HKD 2.40 23.4 21.9 18.8 19.7 1.6 1.6 1.5 1.4 n.a.
Simple Average 5.45 39.8 13.4 51.7 15.6 1.1 1.0 0.9 0.9 6.3
Weighted Average 9.14 65.6 5.4 99.1 20.8 1.0 0.9 0.9 0.8 6.0
Source: Bloomberg, Guotai Junan International.
See the last page for disclaimer Page 4 of 6
23 July 2012
Xinxin Mining 新鑫矿业 (03833)
Company Report

Figure 1 Financial Statements and Ratios
Year end Dec (RMB m)
Income Statement Balance Sheet
2010A 2011A 2012F 2013F 2014F
Year end Dec (RMB
m)
2010A 2011A 2012F 2013F 2014F
Turnover 1,125 1,455 1,506 1,795 2,194 PPE 2,906 4,143 4,520 4,888 5,210
Cost of sales (685) (1,060) (1,136) (1,380) (1,633) Intangible assets 644 624 603 582 563
Gross Profit 440 395 370 415 560 Investment 121 127 133 128 125
SG&A (120) (136) (105) (108) (132) Others 260 286 300 315 331
Profits of Operations 318 245 253 298 416 Non-current assets 3,932 5,180 5,556 5,915 6,229
Finance Cost 38 18 (32) (60) (84)
Others (3) (3) (3) (4) (4) Cash 1,546 611 602 628 658
Profits before taxation 352 251 218 234 328 Trade receivables 292 436 452 539 658
Income Tax (3) (61) (54) (59) (82) Inventory 448 684 602 628 768
Profits after taxation 350 190 163 176 246 Others 48 75 45 56 59
Minority interest 0 1 1 1 1 Current assets 2,333 1,807 1,701 1,851 2,142
Profits attributable to shareholders 350 190 162 175 245
EPS 0.158 0.086 0.073 0.079 0.111
Total Assets 6,265 6,987 7,258 7,766 8,371
DPS 0.150 0.030 0.026 0.028 0.039 Long-term Loans 30 569 753 898 1,097
Others 149 197 216 238 262
Cash Flow Statement Non-current liabilities 179 766 1,039 1,244 1,505
Short-term Loans 44 65 419 674 919
Year end Dec (RMB m) 2010A 2011A 2012F 2013F 2014F Trade payables 346 460 431 514 628
Others 1 1 1 1 1
Net Income 350 190 162 175 245 Current liabilities 390 526 851 1,189 1,549
Operating Capital Change (239) (266) 37 (30) (145)
Dep.&Amortization 70 139 167 183 198 Total Liabilities 570 1,291 1,821 2,325 2,907
Others (141) 87 (307) (69) (81)
CFO 39 149 60 259 217 Minority 216 356 356 355 354
CAPEX (1,049) (1,355) (523) (531) (501)
Others 120 65 36 37 39
Total Equity 5,695 5,695 5,437 5,441 5,464
CFI (929) (1,290) (487) (494) (462) Financial Ratio
Net Bank Loans 74 560 538 400 444
2010A 2011A 2012F 2013F 2014F
Dividend Paid (111) (332) (66) (57) (61) Gross Margin 39.1% 27.1% 24.6% 23.1% 25.5%
Others 170 (21) (54) (82) (108) Net Margin 31.1% 13.0% 10.8% 9.7% 11.2%
CFF 133 207 418 261 275 ROE 6.1% 3.3% 3.0% 3.2% 4.5%
ROA 5.9% 2.9% 2.3% 2.3% 3.0%
Net change in cash (756) (934) (9) 26 30 ROCE 3.3% 5.4% 3.6% 3.9% 4.5%
Cash at beginning of year 2,301 1,545 611 602 628 Free CF(mn Rmb) (1,009) (1,206) (463) (272) (284)
Cash at end of year 1,545 611 602 628 658 Net Gearing -27% 0% 10% 17% 25%
Source: The Company, Guotai Junan International.
See the last page for disclaimer Page 5 of 6
23 July 2012
Xinxin Mining 新鑫矿业 (03833)
Company Report

Company Rating Definition
The Benchmark: Hong Kong Hang Seng Index
Time Horizon: 6 to 18 months
Rating Definition
Buy Relative Performance >15%;
or the fundamental outlook of the company or sector is favorable.
Accumulate Relative Performance is 5% to 15%;
or the fundamental outlook of the company or sector is favorable.
Neutral Relative Performance is -5% to 5%;
or the fundamental outlook of the company or sector is neutral.
Reduce Relative Performance is -5% to -15%;
or the fundamental outlook of the company or sector is unfavorable.
Sell Relative Performance 5%;
or the fundamental outlook of the sector is favorable.
Neutral Relative Performance is -5% to 5%;
or the fundamental outlook of the sector is neutral.
Underperform Relative Performance