2024 results in line with market expectations; 1Q25 results beat market expectations

In 2024, the firm’s revenue rose 24.99% YoY to Rmb9,026mn, net profit attributable to shareholders grew 119.46% to Rmb1,764mn, and recurring net profit increased 96.28% YoY, to Rmb1.70bn. In 1Q25, attributable net profit grew 141.10% YoY to Rmb483mn (-26.66% QoQ). The 2024 results are in line with market expectations, while 1Q25 results beat market expectations. The notable YoY growth in 2024 and 1Q25 earnings was mainly due to a sharp rise in gold prices.

Sales volume and prices of mined gold both increased; cost reduction and efficiency enhancement underway. In terms of volume, the firm's mined gold output grew 5.60% YoY to 15.16t in 2024, and fell 6.89% YoY to 3.34t in 1Q25. In terms of prices, gold ASP rose 23.85% YoY to Rmb557/g in 2024 and averaged Rmb671/g in 1Q25, up 37.22% YoY and 9.22% QoQ. From the perspective of cost reduction, the company continued to pay attention to cost reduction and efficiency enhancement in 2024, with full maintenance cost (+5.25% YoY) at Rmb281/g and cost of sales (-0.76% YoY) at Rmb278/g. In 1Q25, full maintenance cost rose 28.09% YoY to Rmb349/g, and cost of sales increased 11.51% YoY to Rmb355/g. We attribute the temporary increase in costs to declined output and low grades of dressed ores because of seasonal preparation for full-year production in 1Q25. The firm expects costs to gradually return to normal levels in 2-4Q25.

Trends to watch

Gold mine output increased and cost control continued. According to corporate filings, the firm plans to increase its mined gold output to 16.70t in 2025 (+10.16% YoY), and continue to reduce costs and control expenses through centralized procurement and optimization of organizational structure and personnel. Domestically, the firm’s Wulong Gold Mining Co., Ltd. plans to reach full capacity of 3,000t/day ore treatment in 2025. Its Jilong Mining Co., Ltd. plans to increase its daily ore treatment capacity to 1,000t in 2025. In addition, its Xidengping Gold Mine Phase II project has won mining permit, and has designed annual gold production capacity of more than 1t.

Overseas, the firm’s Sepon mine in Laos continues to advance as planned to support gold output, and exploration has paid off. The firm has discovered　　a large porphyry ore site in the southern mine area and plans to complete preliminary resource assessment in 2025. Meanwhile, the firm’s Wassa mine in Ghana restarted DMH pits to further increase gold output, and increased drilling to upgrade resources and enhance production capacity reserves.

Successful completion of H-share listing; growth to accelerate. According to corporate filings, the company launched an IPO on the Hong Kong stock market on March 10, 2024, and 40% of the proceeds were used to acquire new mines. We believe the firm can accelerate M&A, expand its resource reserves, and further increase its output by opening up overseas financing channels.

Financials and valuation

Given the sharp rise in gold prices, we raise our 2025 earnings forecast 53% to Rmb2,992mn and introduce our 2026 net profit forecast of Rmb3,186mn. The stock is trading at 17x and 16x 2025e and 2026e P/E. Maintain OUTPERFORM. Given the earnings forecast revisions and the firm's strong growth potential, we raise our target price 53% to Rmb35.21, implying 22x and 21x 2025e and 2026e P/E, offering 30% upside.

Risks

Sharp fluctuations in product prices; disappointing progress of projects; overseas geopolitical risks.