copper extractant has good growth and profitability. if Zijin pharmaceutical is successfully acquired, the company's profits will be significantly increased. on January 30, the company's second interim shareholders' meeting in 24 years voted to pass a motion on the acquisition of 61% equity and related transactions of Fujian Zijin mineral processing pharmaceutical co., ltd. Zijin pharmaceutical main copper extractant, due to the steady growth of copper demand and the popularity of hydrometallurgy led to the development of copper extractant, as well as Zijin pharmaceutical in the product cost-effective, personnel services and other advantages are expected to gradually increase their market share, we believe that Zijin pharmaceutical if successful mergers and acquisitions will significantly increase the company's long-term profits. We expect the company's 23-25 net profit of 0.84/1.55/0.212 billion yuan, corresponding to 23-25 PE of 34/19/14 times. Comparable company 24-year PE average is 18 times. Considering the scarcity of the company as the first domestic A- share listed company for heavy metal pollution prevention and control and the broad market for non-ferrous heavy metal pollution prevention and control, the company is given 26 times PE for 24 years, with a corresponding target price of 42.38 yuan (previous value of 55.42 yuan), maintaining the "buy" rating.

copper extractant for wet copper smelting, has a good market growth prospects for metal smelting the main way including pyrometallurgical metal smelting and wet metal smelting. Taking copper as an example, by 2020, the global production of wet metallurgy copper using the "leaching-extraction-electrowinning" process has reached 3.9 million tons, accounting for 16% of the total copper production. Compared with pyrometallurgy, hydrometallurgy does not require a high-temperature burning reaction process, which has the advantages of lower energy consumption, less pollution and friendly operation. Under the background of the policy support of energy conservation and environmental protection, the gradual decline of global ore grade and the fact that copper oxide ore has become the main raw material of copper smelting, hydrometallurgy is expected to gradually replace pyrometallurgy and become the mainstream of metallurgical process. Referring to the CommScope Chemical Announcement, the global copper extractant market space is about 16000 tons in 2020, and the market space is expected to increase to about 21400 tons and 31800 tons by 2025 and 2030, with a CAGR of 7.1 percent in 2021-2030. Copper extraction agent has good growth prospects.

copper extractant accounts for a relatively low proportion of copper price and has good profitability

referring to the prospectus of kompu chemical, its copper extractant dosage is about 3-5kg/ton of copper output. according to the calculation of 32.27 yuan/kg and 41.73 gross profit margin disclosed by Zijin pharmaceutical in 2023, the selling price of the company's copper extractant in 2023 is about 55400 yuan/ton (excluding tax), combined with the average price of copper of about 69000 yuan/ton since January 24, the price of copper extractant accounts for about 0.4 percent of the copper price, and the downstream is not sensitive to the price of copper extractant, which is conducive to the copper extractant industry to maintain a better gross margin level.

the global share of Zijin reagent copper extractant is expected to gradually increase

the output of Zijin reagent copper extractant in 2023 is about 1924.36 tons, with a production capacity of 3400 tons. in addition, the company has 2000 tons of mineral processing reagent, 2000 tons of phosphoric acid extractant, 1000 tons of mineral processing lead production capacity, and technical research and development capacity of mineral processing additives. Global demand for copper extractants mainly comes from overseas regions such as Chile and Congo (DRC), with the main competitors being BASF, Solvay, CommScope Chemical and Zijin Pharmaceuticals. Domestic companies have more advantages than overseas giants in terms of service and product cost performance. With the company's copper extraction agent capacity climbing, the scale advantage reflects, in terms of market share and net interest rate is expected to gradually increase.

Risk Warning: New technology market promotion is unfavorable, accounts receivable balance is large, subsidiary expansion is not as expected.