[HK IPO] Analysis of Zhihui Mining's IPO: Weak fundamentals, small float to compensate?

Today, four new stocks suddenly appeared, bringing the total number of new stocks currently under subscription to six, and all the funds for new stock subscriptions are conflicting.

Every year around mid-year and year-end, the Hong Kong Stock Exchange, in order to boost performance, sees this phenomenon of clustered listings, which is an unwritten convention.

Let’s first talk about Wisdom Mining$ZHIHUI MINING(02546.HK) 

1. Company Overview

Wisdom Mining was established on November 28, 2013, and is a full-industry-chain mining enterprise specializing in the exploration, mining, ore dressing, and sales of non-ferrous metals such as zinc, lead, and copper in the Tibet region.

The company's core asset is the Mengya'a Mine located in Rongduo Township, Jiali County, Nagqu City, Tibet. The mining area includes an open-pit mine that has been in operation since 2007 and an underground mine that will begin commercial operation in the second quarter of 2025.

The company holds exploration rights covering approximately 58.5 square kilometers and mining rights covering over 4.5 square kilometers. The mining area is located in a high-altitude region at 5,000-5,300 meters above sea level, within the state-designated Jinda Integrated Exploration Zone, which is rich in mineral resources.

According to data from Shanghai Nonferrous Metals Network, in 2024, Wisdom Mining ranked fifth in zinc concentrate production in Tibet (market share: 11.1%), fourth in lead concentrate production (market share: 4.2%), and fifth in copper concentrate production (market share: 0.1%), making it one of the important non-ferrous metal suppliers in Tibet.

The company's main products are zinc concentrate, lead concentrate, and copper concentrate. Among these, zinc concentrate is the company's most important revenue source, accounting for 61.4%, 50.1%, and 71.6% of revenue in 2022, 2023, and 2024, respectively.

The company's customers mainly include non-ferrous metal traders and refineries, many of which are listed companies and state-owned enterprises. Customer concentration is high, with the top five customers accounting for 93.9%, 90.1%, and 88.1% of total revenue in 2022, 2023, and 2024, respectively.

From the overview, it can be seen that Wisdom Mining belongs to the commodity industry, and its business is bound to exhibit strong cyclicality. At the same time, the company's revenue mainly relies on a large-client model—a double-edged sword—resulting in unstable performance sustainability.

2. Company Prospects Analysis:

China's zinc concentrate market is facing a structural supply shortage.

According to industry data, from 2018 to 2024, due to the short lifespan of some domestic mines and unstable ore grades, China's zinc concentrate production declined at a compound annual growth rate (CAGR) of -2.3%.

At the same time, as the world's largest consumer of refined zinc, China's demand for zinc concentrate continues to grow, driven mainly by stable demand from infrastructure, construction, new energy, photovoltaics, and energy storage sectors.

From 2025 to 2028, China's zinc concentrate demand is expected to increase at a CAGR of 2.2%.

In contrast to demand growth, domestic production cannot meet demand, and imports are needed to fill the gap. From 2025 to 2028, imports are expected to maintain a CAGR of 2.0%.

The lead and copper markets also show positive trends. Lead, as an important material for batteries, has stable demand in the automotive and energy storage sectors. Copper is a key raw material for new energy, power infrastructure, photovoltaics, and wind power. With the energy transition accelerating, copper's long-term demand prospects are promising.

Due to high altitude, harsh natural conditions, and relatively lagging infrastructure, new entrants face significant barriers in Tibet. This inadvertently provides a natural moat for companies already operating in the region.

Brother Cai believes that, in terms of the industry, future demand is twice the supply, so Wisdom Mining should perform relatively well in this regard. However, its high-altitude location is a double-edged sword: it offers unique resource exclusivity as a moat but also makes it prone to sudden temporary accidents due to the high-altitude environment!

3. Performance Analysis:

According to the financial data disclosed in Wisdom Mining's prospectus, between the three fiscal years from 2022 to 2024, the company's revenue increased from RMB 482 million in 2022 to RMB 546 million in 2023, then dropped to RMB 301 million in 2024.

Based on this calculation, the company's three-year revenue growth rate was -20.95%, showing a negative growth trend.

This negative growth was mainly due to a significant revenue decline in 2024, when revenue falling 44.8% year-on-year compared to 2023.

In terms of profit, the company's net profit from 2022 to 2024 was RMB 118 million, RMB 155 million, and RMB 56 million, respectively.

Based on this calculation, the company's three-year net profit CAGR was -31.17% (2024 net profit declined compared to 2022). In 2024, net profit fell sharply by 63.87% year-on-year compared to 2023.

The performance looks quite weak, mainly due to a one-time factor in 2024. However, even excluding this special year, revenue in the first seven months of this year was only flat compared to 2023.

At this point in the article, it’s clear that Wisdom Holdings' fundamentals are not great—performance is mediocre and sustainability is poor. The significant year-on-year growth in this year's performance may be misleading, as there has been no real progress compared to 2023.

4. Cornerstone Investor Analysis:

Wisdom Mining has introduced two cornerstone investors for this IPO: Spike International Limited (wholly owned by Zhaojin Mining) and Greater Bay Area Homeland Investments (including GIGA Industries Limited and Poly Platinum Enterprises Limited).

The cornerstones are not well-known, and Zhaojin Mining's participation is at best a friendly cameo from an industry partner.

5. Valuation Analysis:

Wisdom Mining's IPO price range is HK$4.10-4.51, implying a post-issue market capitalization of approximately HK$2.0-2.2 billion. The valuation analysis is as follows:

From a price-to-earnings (P/E) perspective, based on the 2024 net profit of RMB 56 million, the company's static P/E ratio is approximately 32.48-35.73x. Based on the first seven months of 2025 net profit of RMB 52 million, the annualized dynamic P/E ratio is approximately 16.85-18.54x, indicating a significantly lower valuation level.

Comparison with Industry Peers:

Chihong Zinc & Germanium (A-share): Market cap of RMB 32.56 billion, P/E ~25x

Zhongjin Lingnan (A-share): Market cap of RMB 23.32 billion, P/E ~21x

Western Mining (A-share): Market cap of RMB 59.5 billion, P/E ~20x

Huayu Mining (A-share): Market cap of RMB 22.04 billion, static P/E 87.01x, TTM P/E 24.44x

Tibet Summit (A-share): Market cap of RMB 12.61 billion, static P/E 54.91x, TTM P/E 28.21x

Compared to A-share peers, Wisdom Mining's static P/E (32.48-35.73x) is higher than the industry average of ~20-25x, but its TTM P/E (16.85-18.54x) is relatively reasonable.

Brother Cai believes the valuation is acceptable—not cheap, but not overly expensive either. However, given its mediocre fundamentals, this valuation is somewhat similar to JD Industrial's mid-range pricing, offering little advantage!

Preliminary Analysis Summary of Wisdom Mining:

From a fundamental perspective, if conservative investors base their IPO subscription decisions purely on fundamentals, Wisdom Mining lacks certainty.

First, the company operates in the highly cyclical commodity sector, and cyclicality determines its unstable performance.

Second, the company's revenue relies heavily on a large-client model—a double-edged sword. While Wisdom Mining has a unique resource-exclusive moat, its high-altitude location also makes it prone to sudden accidents, which is a double-edged sword.

Third, excluding the unusual year of 2024, the significant growth in this year's performance is actually a smokescreen, with no real progress compared to 2023.

In terms of cornerstone investors, there are no well-known names, only industry partners. The valuation also offers no particular advantage.

Although the company's fundamentals are not strong, this IPO only aims to raise HK$55 million, making it a small-cap stock.

For such small-cap stocks, the key is insider information—whether there are strong market makers or coordinated speculative funds behind the scenes. Brother Cai will discuss this in the final article on the public account.

Whether to subscribe depends on the presence of strong market makers. Of course, if you have no insider information, you can observe the public subscription and margin financing data. If it's lukewarm or too cold, there may be risks.

However, funds for all six new listings are conflicting. After analyzing each new stock on the public account, we can discuss how to allocate funds for this wave of new listings based on subscription analysis and certainty.

During periods of intensive new listings, how to allocate funds among different targets is a topic that requires comprehensive judgment based on individual circumstances. We recommend rational analysis, independent decision-making, and risk control.

Disclaimer

This content is purely for free public benefit sharing and reflects personal thoughts. It does not constitute any investment advice. All investment returns and risks belong to the investors themselves. The market carries risks, and investment requires caution.$GUOXIA TECH(02655.HK) $IMPRESSION DHP(02695.HK) $B&K CORP-B(02396.HK) $HASHKEY HLDGS(03887.HK)