Analysis of Investment Opportunities in Non-ferrous Industry under the Background of the Integration of Central Enterprises

According to media reports, the goal of the SASAC in 2011 was to promote the overall listing of 16 central SOEs. At the same time, the newly established Guoxin Holding Asset Management Company will become an overall listing propeller for central enterprises. The progress of the integration of Minmetals, China Color, China National Gold and Chinalco may also be faster than market expectations. For listed companies, the most beneficial will be the development of Minmetals, China National Shares and China Gold Gold, and certain listed companies of Minmetals also have certain investment opportunities.

The goal of the SASAC in 2011 was to promote the overall listing of 16 central SOEs. Currently, the fastest growing overall listing is in the Minmetals Group. The newly established Minmetals shares are being stripped of bad assets, strengthening the main business, and injecting listed assets.

The newly established Guoxin Holding Management Company will serve as a platform for the restructuring of state-owned enterprises and asset integration. It will follow the idea of ​​a mature company to absorb the lower-ranking central enterprises with lower asset quality. In addition, as the overall listing platform for central SOEs, Guoxin Co., Ltd. uses currency investment as one of the promoters to promote the overall listing of the restructuring group.

According to the indicators of corporate profits and taxation announced by the SASAC, Chinalco, China National Gold, and China National Colors rank behind, but considering the state’s need to control key resources and some industries, related companies may be able to Adjust the asset allocation to complete the integration so as to achieve optimal resource allocation. At present, it is the main way to integrate similar assets through Guoxin’s participation in some of the shares. According to the information already disclosed, Guoxin has already participated in the Minmetals shares and is expected to participate in the Chinese aluminum industry. Its purpose is to integrate the rare earth assets of Minmetals and Chinalco.

According to the requirements of the SASAC, a group company whose main business has been listed as a whole should digest the surviving company and then achieve overall listing at the group level. In the selection of listed capital markets, in accordance with the SASAC plan, the overall listing of central SOEs will be chosen “overseas plus territory”, namely the A+H model.

In promoting the reorganization of central SOEs, the state will maintain absolute control over the state-owned economy in seven industries, including military, coal, power grid, civil aviation, shipping, telecommunications, and petroleum and petrochemicals. For several central SOEs in the non-ferrous industry, the way of future integration is still uncertain, and the probability of the country’s new shareholding is greater than that of the seven major industries.

Reorganization will no longer pursue quantity but focus on quality. This means that the 30-50 target of the central government's total target previously determined will no longer be strictly required, but will be mainly based on actual conditions. We expect that a number of nonferrous state-owned enterprises, including Chinalco, China National Gold, and China National Color, will continue to maintain the status of their operations.

The central state-owned enterprises that will ultimately achieve overall listing may well be a clean and clean listed company. They have no group companies, no backing companies, and operate in full accordance with the requirements of the capital market.

We believe that the progress of the integration of Minmetals, China Color, China National Gold and Chinalco may be faster than market expectations, given the speed of management's promotion of the integration of central enterprises. For listed companies, the most beneficial will be the development of Minmetals, China National Shares and China Gold Gold, and certain listed companies of Minmetals also have certain investment opportunities. We will continue to track the progress of related enterprise integration.