Its resource expansion strategy implemented during industrial low tide greatly strengthens the company’s development potential.
Its resource stock is substantially increased.
It acquires these resources at around CAD36mn (i.e. Rmb198mn), which is comparatively low.
Periodic price surge of nickel product is still expected.
As forecasted in our former report, price of nickel product saw periodic surge since April 2009. As a result, pressure of product supply made nickel price hard to increase substantially in the short term.
Investment Suggestion
We assume that its 2009-2011E nickel price is Rmb1100mn/ton, Rmb1300mn/ton and Rmb1400mn/ton; considering dilution after additional issuance, we forecast its 2009-2011E EPS to be Rmb0.19, Rmb0.51 and Rmb0.76 respectively.
We think the company is still worthy of investment in the long term, but in the short run, its valuation is beyond historic mid-value. Moreover, pressure of nickel price surge in the short term is still big, thus we hold “Cautious” rating for the counter.