报告名称：Jiangxi Copper(00358.HK)FY15 results miss on price weakness and higher SG&A;
报告类型：港股研究
报告日期：2016-04-04
研究机构：德意志银行
股票名称：江西铜业,江西铜业股份
股票代码：600362,00358
页数：11
简介：Results missed on copper price weakness and higher SG&A; Hold on valuation
Jiangxi Copper’s FY15 NPAT was RMB690m, representing a 78%YoY decline,on copper price weakness, higher SG&A expenses (RMB2.5bn vs. DBeRMB1.8bn) and potentially limited cost reduction efforts during the period. Wefactor in the 2015 numbers and revise down our 2016E earnings by c.50% toRMB471m, to reflect higher SG&A. Meanwhile, we believe a P/E valuation is nolonger appropriate as JXC delivers limited earnings. We now use DCF life ofmine to value this company, given its nature as a mining company. MaintainHold on valuation.
2016 outlook
JXC plans to cut its copper cathode output by 75kt this year to 1,175kt, as perthe smelters joint curtailments meeting in late 2015. The mined copper outputtarget is 207kt in 2016, relatively stable vs. last year’s 209kt. Meanwhile, JXCproposed an A-share placement this Feb with maximum proceeds ofRMB3.5bn, mainly for Chengmenshan mine Phase III project (10,000t/d),Yinshan mine upgrade (8000t/d) and Chengxin mine No.5 tailings dam project.The total capex plan for those projects is about RMB7.4bn, and the companyexpects to spend RMB4.5bn capex in total in 2016. Given the market volatilityand uncertainty of issuance, we have not factored this into our model.
Hold on DCF valuation; risks
We are finding the use of P/E methodology for reaching our target price lessappropriate, owing to the company’s limited earnings during the metal downcycle.We are therefore moving to value the stock using DCF life of mine,owing to the nature of the mining business. This is consistent with ourmethodology for other nonferrous names under our coverage across the region.Our target price of HKD8.9 for JXC is based on a life-of-mine DCFmethodology, 9.6% WACC (3.9% Rf, 5.6% MRP and Beta of 1.4), translatinginto 0.6x 2016/17 DBe BVPS. Key risks include Risks - stronger/weaker copperprice; uncertainty in cost control.
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