中国黄金业报告：至今为止黄金仍旧黯淡

1、Focus charts and tableFigure2:ChinagoldcompaniessharepricevsgoldpriceFigure3:Goldpricevsratecutexpectations3753152551951,600751,450601,300451,150301,00015-1,670Gold price (US$/oz)Probability of Cut (%)Gold price (US$/oz)Probability of Cut (%)1,5701,5201,4701,4201,3701,320share (LHS) Gold Jun-19of (L

2、HS,Jun-19Source: The BLOOMBERG PROFESSIONALTM service, CreditSuisse ResearchSource: The BLOOMBERG PROFESSIONALTM service, Credit Suisse ResearchFigure4:GoldpricevsUSbondyieldFigure5:ZijinsharepricevsgoldpriceJan-19Jan-194.003.503.002.502.001.501.00Gold price vs. Zijin H share priceZijin H share pric

3、ey = 0.0008x + 1.1852Zijin H share priceR = 0.0246Gold price (US$/oz)Gold price(XAU,USD/oz)10yr treasuryyield1,0001,2001,4001,6001,800Source: The BLOOMBERG PROFESSIONALTM service, CreditSuisse ResearchSource: The BLOOMBERG PROFESSIONALTM service, Credit Suisse ResearchUS$/oz1,4421,4512019E Gold pric

4、e1,3341,3911,393US$1,412/ozFigure6:Priced-ingoldpriceincurrentsharepricesFigure7:ChinaUS$/oz1,4421,4512019E Gold price1,3341,3911,393US$1,412/oz1,5001,4501,40030%25%20%15%1,3501,300Zijin HZijin AZhaojinCN GoldSD Gold H10%5%0%Priced ingold price2019EZijinZhaojinSDGoldCNGoldSource: The BLOOMBERG PROFE

5、SSIONALTM service, CreditSuisse ResearchSource: The BLOOMBERG PROFESSIONALTM service, Credit Suisse ResearchFigure8:GoldcompaniesvaluationcomparisontableMcapP/E (x)P/B (x)EBITDA (x)20E20EYld(%)20EYld(%)CompanyTicker(US$b)PxRatingTPUpside19E20E21E19E20E21E19E20E21EZijin H2899.HK11.13.0O4.035%13.710.9

6、5.314%5.1%8.0%Zijin A601899.SS11.13.6N3.60%18.815.02.07.67.06.714%3.7%5.8%Zhaojin1818.HK3.68.6N9.04%46.324.51.67%1.1%0.3%SD Gold H1787.HK12.516.9N16.1-5%11%1.4%5.6%SD Gold A600547.SS12.530.7U14.4-53%67.938.03.718.514.014.011%0.7%2.7%Zhongjin Gold600489.SS4.18.3U7.0-15%149.910.2

7、9.42%0.4%0.5%New montNEM.N30.336.9O50.035%22.65.75.911%1.5%8.8%Barrick GoldGOLD.N29.116.4N21.028%27.514.76.513%1.0%8.5%Franco NevadaFNV.N18.396.2N100.04%28.221.423.88%1.0%3.4%New crestNCM.AX16.729.8N31.87%-23.532.8-7.28.512%0.5%1.4%Agnico EagleAEM.N14.158.4O70.020%62.830.82.69%1.

8、2%4.6%Perseus MiningPRU.AX0.70.8O0.99%-29.654.2-3.94.34%0.0%-2.4%Wtd Avg.140.434.523.62.011%1.4%5.9%Source: Company data, Credit Suisse estimatesGold lacking lustre, fornowWho outperforms when gold price goes up/down?Historically, the more revenue a company generates from gold mining, the better its

9、 share performance is during gold price rallies. Our correlation analysis shows Shandong Gold-Hs share price has a higher correlation with gold price of 92% vs Zijins 35%. From a different point of view, since 2011, Shandong Gold-As share price increased an average of 72% in three rounds of gold pri

10、ce rally, Zijin-As grew an average of only 17% in the same period. This isfurtherconfirmedwithouranalysisofgoldcompaniesearningssensitivitytogoldprice,with Shandong Gold the most sensitive and Zijin the least, due to Shandong Golds pure gold exposure vs Zijins revenue from gold at 60%. However, Ziji

11、ns share is more resilient to gold price downturn.Everythingfollowsgoldprice,goldpricefollowsrate cutexpectationWe initiate coverage on the China gold sector. China gold companies share prices closely follow gold price movements. The value of gold is mainly driven by the Feds rate cut/hike movements

12、, among other factors including geo-politics, economy growth expectations, etc. Actually, gold price moves before the cut/hike is made, closer to the movements in rate cut expectations (Figure 2). Gold supply, demand and costs follow gold price, rather than the other way around for other commodities

13、 and metals. We believe that the US rate cut has stopped for now, leaving limited upside for gold price from the spot level, but 2020E would average higher than 2019E. We estimate gold price of US$1,412/US$1,570/US$1,450 per oz in 2019-21. Intheshortterm,weseedownsidepressureforgoldprice,given(1)the

14、lessstrongexpectation for rate cut, (2) de-escalation of the trade war, and (3) Brexit progress.Financials and operations analysisZijin and Zhongjin Gold are both engaged in gold and copper businesses, with gold revenue at60% and copper at 30% of total income, while Zhaojin and Shandong Gold are mos

15、tly into the gold business. Zhaojins and Shandong Golds major mines are located in the Shandong province, which is one of the best-quality gold mine veins in China, with better grades and thus lowercoststhanpeers.Intermsofgrowth,ZijinandShandongGoldhavegainedvolumeupside potential through overseas M

16、&As. Overall, Zijin enjoys the best ROE among peers, thanks to its solid margins, healthy gearing, and asset turnover rate.Stock picks and valuationsZijin-H has been a laggard, with share price +0% YTD (vs Shandong Gold-Hs +25%). We estimate that priced-in gold prices for the names are at US$1,300-1

17、,450/oz levels, with Zijin-H priced at a lower gold price at US$1,334/oz and Zhongjin Gold priced at US$1,451/oz. We estimate 2020 gold price of US$1,570/oz, providing the most upside for Zijins valuation. We initiate coverage on the China gold sector, with: OUTPERFORM on Zijin-H (TP HK$4.0) for its

18、 resilience to market volatility and volume growth potential; NEUTRAL on Zijin-A (TP Rmb3.6) for fair valuation, NEUTRAL on both Shandong Gold-H (TP HK$16.1) and Zhaojin (TP HK$9.0) given their fair valuations despite cost advantages; UNDERPERFORM on Shandong Gold-A (TP Rmb14.4) on its rich valuatio

19、n; and UNDERPERFORM on Zhongjin Gold (TP Rmb7.0),onitsless-optimalresourcesquality,thinmargins,andstretchedvaluation.Wederive our TPs by averaging (1) 2019E P/BVPS and (2) target 2019-21E average EV/EBITDA, in order to capture both asset quality and growth potential. This is consistent with our valu

20、ation methodology for other China metals and mining coverage universe.ZijinisthemostresilientwhileShandongGold is the mostsensitiveGoldpricemovesbeforethecut/hikeismade, closer to the movements in rate cut expectationsZijinenjoysthebestROEamongpeers,thanks toitssolidmargins,healthygearing,andasset t

21、urnoverrate.We initiate coverage on Zijin-H with an OUTPERFORMratingandTPofHK$4.0forits resilience to market volatility and volume growthpotentialWhooutperformswhengoldpriceup/down?Share price correlation with gold pricesFigure 9: Gold companies share price correlations with gold price, SHCOMP and H

22、eng Seng Index (since 2003)Correlation AnalysisZijin HZijin ASDG HSDG AZhaojinZhongjinGold priceSHCOMPHSICorrelation with gold35%-12%92%86%70%79%100%33%63%Correlation with SHCOMP75%43%24%46%-12%59%33%100%72%Correlation with HSI53%-12%-10%59%2%56%63%72%100%Source: The BLOOMBERG PROFESSIONALTM service

23、, Credit Suisse ResearchWe calculated China gold companies share price correlations with gold price, SHCOMP Index and Heng Seng Index. Data shows that Shandong Gold-H share price has the strongest correlation with gold price (92%). Shandong Gold-A/Zhaojin/Zhongjin Gold share prices correlationwithgo

24、ldpriceisrelativelyhightoo,at86/76/79%.Zijinscorrelationwithgoldprice was weak, at 35% (H-share) and -12% (A-share). We believe the difference is caused by different exposures to gold business. Zijins gold revenue accounts for 60% of its total revenue, vs 90% for Zhaojin and Shandong Gold. Investors

25、 perception is another reason.Whengoldpricerallies,investorsusuallypreferpure-goldplaysratherthanmixed-minerslike Zijin, thereby making Zijins correlation with gold price weak.Outperformer in gold ralliesFigure 10: China gold companies average share price movements during gold price increase/decreas

26、e periodsSD Gold A96%SD Gold A96%GoldZijin A 27%15%Zijin A-22%Gold-25% CN Gold -29%Zijin H Zhaojin-32%-37% SD GoldA-37%36%32%CN Gold Zijin HZhaojin 63%Data shows that Shandong Golds-H share pricehasthestrongestcorrelationwithgolds priceGold Gold upSource: The BLOOMBERG PROFESSIONALTM service, Compan

27、y data, Credit Suisse estimatesShandong Gold-As share price the most sensitive, Zijin-As the most resilientWe have analysed gold companies share prices movements in different gold price trends. Results indicate Shandong Gold-As share price is the most sensitive to gold price increases, and Zijin-As

28、is the most resilient when gold price falls. Prior to 2011, gold price rally continued for a decade, and so did gold companies share prices. Between 2011 and 2019, gold price saw three rounds of increase (+30%/+20%/+32%), averaging at +27%. During these periods, Shandong Gold-As share price was the

29、most sensitive, achieving an average of 96% increase, while Zijin-As share price showed the least sensitivity to gold prices, with only 15% average increase, the only stock with an increase less than that of gold price. On the other hand, during the three rounds of decline (-45%/-17%/-13%, averaging

30、 -25%), Zijin-As share showed theZijin-Asisthemostresilientwhenthegold pricefallsmost resiliency, with share price average decrease of 22%, the only one with less decline than gold price decline. Shandong Gold-As share price had the largest average decline at 37%.We believe the different sensitiviti

31、es between share price and gold price can be explained by differences in (1) product-mix, i.e., exposure to the gold business, and (2) company leverage. Zijin, among the four companies, has the largest non-gold revenue component, at 40%, while Shandong Gold derives 99% of its revenue from gold. Shan

32、dong Golds elevated leverage could explain its higher sensitivity vs Zhaojin whose gold exposure is 90%, similar to Shandong Golds.Figure 11: China gold companies share price movements when gold price is down/up (%)PeriodZijin HZijin ASDG HSDG AZhaojinZhongjinGold priceSHCOMPH S IAug-03 to Sep-11145

33、9%9%7832%472%3371%424%69%Sep-11 to Dec-15-43%-32%-60%-77%-48%-45%43%Dec-15 to Jul-1650%4%147%124%65%30%-16%Jul-16 to Dec-16-14%-5%-20%-28%-18%-17%4%Dec-16 to Apr-1950%30%-14%-4%-19%20%3%Apr-19 to Aug-19-29%-28%-31%-7%-33%-13%-16%Aug-19 to Sep-197%11%87%154%70%48%32%9%Gold price down-29%-22%-37%-37%-

34、32%-25%10%3%Gold price up36%15%-96%63%32%27%-1%10%Source: The BLOOMBERG PROFESSIONALTM service, Company data, Credit Suisse estimatesSensitivity analysisThis is further confirmed with our sensitivity analysis. A 5% increase in gold price would push Zhaojins and Shandong Golds 2019E earnings up by 20

35、-25%, but only 7% for Zijin. Zhongjin Golds higher sensitivity is driven by its thin margins.A 5% increase in gold price would push Zhaojins and Shandong Golds 2019E earnings up by 7%Figure12:Earningssensitivityto-5%goldpriceFigure13:Earningssensitivityto+5%goldprice0%30%-5%25%-10%20%-15%15%-20%10%-

36、25%5%-30%ZijinZhaojinSDGoldCNGold0%ZijinZhaojinSD GoldCN GoldSource: Company data, Credit Suisse estimatesSource: Company data, Credit Suisse estimatesEverythingfollowsgoldprice,goldprice follows Fed rate cut expectationFigure14:Goldpricemovebeforeactualratehikes/cuts25bps cut, Jul 3125bps cut, Sep

37、1825bps cut, Jul 3125bps cut, Sep 1825bps cut, Oct 3125bps hike,Sep 26201825bps hike, Dec 19 201825bps hike, Jun 14 201725bps hike, Mar 21 201825bps hike, Jun 13 201825bps hike, Dec 14 201625bps hike, Mar 15 2017Dec 13 2017Dec 16 201525bps hike,25bps hike,1,6001,500315.01,400255.01,300195.0Jan-15 Fe

38、b-15 Mar-15 Apr-15Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 Ma

39、y-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20China Companies share price(LHS)Gold price Source: Company data, Credit Suisse estimatesChina gold companies have seen 12

40、% share price hike YTD, driven by gold price rally amid expectationsofFedratecuts,globaleconomyconcerns,andregionalgeo-politicalconflicts.We believe the current stock market has largely priced in gold price hikes so far, but not 2020E. We estimate gold price to average at US$1,570/oz in 2020, 11% hi

41、gher than 2019s average, and 5% higher than the spot level. Companies with volume growth potential, cost leadership,high-qualityresources,andstrongfinancialswouldbenefitfromstronggoldprices.Figure15:GoldpricevsprobabilityofFedratecut901,570751,520601,470451,420301,37015Apr-19May-19Jun-19Jul-19Aug-19

42、Sep-19Oct-19-Apr-19May-19Jun-19Jul-19Aug-19Sep-19Oct-19Probability of CutGold price (RHS,US$/oz)Source: The BLOOMBERG PROFESSIONALTM service, Credit Suisse ResearchGold price is mainly driven by rate cut expectationsThe value of gold is mainly driven by the Feds rate cut/hike movements, among other

43、factors includinggeo-politics,economygrowthexpectations,etc.Inreality,goldpricemovesbeforethe cut/hike is made, closer to the movements in rate cut expectations (Figure 16). Empirically, gold price is negatively correlated with US treasury yield. The rationale behind that is when marketfavoursfixedi

44、ncomeinvestments,(likelydrivenbyhigherinterestrates,marketconcernsThevalueofgoldismainlydrivenbytheFeds ratecut/hikemovements,amongotherfactors including geo-politics, economy growth expectationsabout slowing economy growth or recessions), investors prefer fixed income investment instruments. As a r

45、esult, treasury yields fall. Gold is another kind of a safe-haven asset and investorstendtoinvestingoldwhentheeconomyoutlookdeteriorates,therebypushinggold prices higher. In other words, if we view gold as a no-dividend bond, it makes sense for gold price to see a negative correlation with treasury

46、yield.Gold supply and demand follow goldpriceGold priceunlike other commodities or metals whose prices are driven by supply-demand dynamicsactually drives gold supply, demand and costs, rather than the other way around. When gold price increases, investment demanda major component of gold demand als

47、o increases, as investors chase the rally in gold price (Figure 17). Gold miners are incentivised to increase production in order to capture the high prices. With stronger gold price, exploration expenditure also increases (Figure 18). On the other hand, when gold price falls, investors interests in

48、 the metal eases and weighs down gold demand volume. Gold miners have less incentive to produce more, given the softening margins.The gold priceunlike other commodities or metals whose prices are driven by supply- demand dynamicsactually drives gold supply demand and costs, rather than the other way

49、 aroundFigure16:GolddemandbreakdownvsgoldpriceFigure17:Goldexplorationexpenditure(US$bn)vsgoldprice -2010 2011 2012 2013 2014 2015 2016 2017 2018CentralbankspurchasingBar &coin180016001400120010008006004002000-2,000Exploration expenditure(US$ bn)Exploration expenditure(US$ bn)Goldprice(US$/oz)1,0005

50、002000200120002001200220032004200520062007200820092010201120122013201420152016201720182019FabricationLBMA Gold Price (US$/oz)Exploration Expenditure(US$bn)Gold price ($/oz,RHS)Source: World Gold Council, Credit Suisse ResearchSource: WoodMac, Credit Suisse estimatesso does gold mines costsFigure18:G

51、oldpricetrendvs.minesC1costlevels1,800Gold price90% percentile total costWorld wtd. avg. mines C1 cost2000200120022003200420052006200720082009201020112012201320142015201620172018Goldprice($/oz)90% percentile2000200120022003200420052006200720082009201020112012201320142015201620172018Source: WoodMac,

52、Credit Suisse estimatesOn the cost side, as shown in Figure 18 above, world weighted average C1 cost follows the trend of gold price. The 90% percentile miners C1 costs also closely follows gold prices. Some believethat,likeothercommodities,90%percentileminerscostsprovide“costsupport”togold price. B

53、ut we believe its more like the other way around: marginal gold miners ramp up/suspend production according to gold price. When gold price increases, financially non-The 90% percentile miners C1 costs alsoclosely follow gold pricesfeasibleminesbecomeprofitableandthusrampupproduction.Whengoldpricefal

54、ls,high-cost profit-making mines need to shut down due to squeezed margins. Theres also an interesting crossing in 2008-09, before which 90% percentile mines costs were 15% higher than gold price, and after which 90% percentile mines costs have been 12% lower than gold price. We believethisispartial

55、lybecauseminershavebecomemoreprudentafterbeinghitbythe2008- 09 financial crisis.Gold price outlookFigure 19: Credit Suisse gold price forecastsSource: Credit Suisse estimatesGold price forecastsWe forecast gold price to average at US$1,409/1,569/1,450 per oz in 2019E/2020E/2021E, given the strong go

56、ld price momentum supported by several macroeconomic factors.Gold price spike in through late 2Q19 and most part of 3Q19 surprised us, despite having forecastedearlierthisyeargoldpricetorise.Inthelongerterm,webelieveuncertaintieswould still be there. There have been more than 30 interest-cuts this y

57、ear, including the Feds three 25 bp cuts in July, September and October. Also, the interest-rate swap markets have priced in over 50 additional cuts over next year. Monetary easing remains the major stance in most economies.Asaresult,goldpriceseessupportfromincreasingvolumeofnegativeyieldbond(US$17

58、tn, at 30% of investment-grade bonds), as opportunity cost for holding gold declines.Weforecastthegoldpricetoaverageat US$1,409/1,569/1,450 per oz in 2019E/2020E/2021EFigure20:NegativeyieldbondvolumeFigure21:Goldpricevsratecutexpectation189014756010451,5701,5201,4701,4206301,370151,320Dec-15 Mar-16

59、Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19Jun-19Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19Jun-19Negative yield debt current market cap (US$ tr)ProbabilityofCutGold price (RHS,US$/oz)Source: The BLOOMBERG

60、PROFESSIONALTM service, Credit Suisse ResearchSource: The BLOOMBERG PROFESSIONALTM service, Credit Suisse ResearchOur global strategist expects US rates to remain unchanged at 1.50-1.75% through the end of next year. Downside risks remain, but a healthy labour market and strong consumer finances sho