瑞士银行——中国铅锌行业研究报告2008年8月

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收藏 2008-08-11

T urnaround unlikely in the short term &#1048708; Fundamentals remain weak China is a key driver of the global oversupply in zinc and lead. We believe there could be a severe market surplus in China as it increases production by 14% over the next three years from the 2007 global production level. The market surplus will come from mining and smelting capacity expansion, higher imports, and weakerthan- expected demand growth. &#1048708; Price weakness could last at least 12 months Our global mining &amp; metals team forecasts the London Metal Exchange (LME) zinc price per pound at US&cent;96.5/98.8/130.0 for 2008/09/10, and the LME lead price per pound at US&cent;100.2/90/125 over the same period. Supported by the marginal cost of US&cent;95/lb, we estimate the average Shanghai Non-ferrous Metal Market (SMM) zinc price per tonne would be Rmb16,956/14,927/19,650, and the lead price per tonne would be Rmb17,437/15,000/18,895 for 2008/09/10. &#1048708; Risks to our view: substantial reduction in China output Although unlikely, we think China’s market surplus can be reversed only if production is lowered by 15%, either by a coordinated/joint move by producers or by closing down small producers. There are signs that Chinese miners and smelters are responding to the weak prices. &#1048708; Our top pick: Shenzhen Zhongjin Lingnan We initiate coverage of Shenzhen Zhongjin Lingnan (Buy), Western Mining (Buy), and Yunnan Chihong Zinc &amp; Germanium (Sell). We believe Shenzhen Zhongjin Lingnan will best weather weak zinc and lead market fundamentals because of its management expertise, output expansion, and strong by-product prices.Contents page Summary and investment case 3 Industry analysis 6 Competitive analysis 22 Industry risks 25 Valuation and comparables 26 Company pages 35 — Western Mining..................................................................................................36 — Investment Thesis........................................................................................37 — Western Mining’s key drivers .................................................................37 — Key catalysts .........................................................................................40 — Risks .....................................................................................................42 — Valuation and basis for our price target..................................................42 — UBS versus consensus..........................................................................42 — Sensitivity analysis.................................................................................42 — Risk analysis..........................................................................................43 — Return on capital ...................................................................................43 — Financials ..............................................................................................44 — Valuation ...............................................................................................47 — Shenzhen Zhongjin Lingnan Nonfemet...............................................................54 — Investment Thesis........................................................................................55 — Shenzhen Zhongjin Lingnan’s key drivers..............................................55 — Key catalysts .........................................................................................57 — Risks .....................................................................................................58 — Valuation and basis for our price target..................................................59 — UBS versus consensus..........................................................................59 — Sensitivity analysis.................................................................................59 — Risk analysis..........................................................................................60 — Return on capital ...................................................................................61 — Financials ..............................................................................................61 — Valuation ...............................................................................................65 — Yunnan Chihong Zinc &amp; Germanium..................................................................71 — Investment Thesis........................................................................................72 — Fundamental weakness in a tough year.................................................72 — Key Catalysts.........................................................................................75 — Risks .....................................................................................................75 — Valuation and basis of our price target...................................................76 — UBS versus consensus..........................................................................76 — Sensitivity analysis.................................................................................76 — Return on capital ...................................................................................77 — Financials ..............................................................................................78 — Valuation ...............................................................................................82Summary and investment case We initiate coverage of Shenzhen Zhongjin Lingnan (Zhongjin Lingnan) with a Buy rating, Western Mining with a Buy rating, and Yunnan Chihong (Chihong) with a Sell rating. We believe Zhongjin Lingnan will best weather the current weak zinc and lead market fundamentals and outperform peers, with its management expertise, mining and smelting capacity expansion and strong byproduct prices.