Kaiyuan Securities has issued a research report estimating that Tongguan Gold (00340) will post net profit attributable to shareholders of HK$1.497 billion, HK$1.919 billion and HK$2.759 billion for 2026-2028 respectively, implying PE ratios of 8.8x, 6.8x and 4.8x based on the share price on October 12, and has initiated coverage with a "Buy" rating.
The brokerage notes that the company focuses on gold exploration, mining and recovery, and owns two core gold mining bases in Tongguan, Shaanxi and Subei, Gansu. As of the end of 2025, the company held 77.6 tonnes of gold metal resources with an average grade of 6.45 g/t. The company has excellent gold resource endowments and is actively advancing the conversion of exploration rights into mining rights, so its gold production and sales are expected to continue growing.
The main points of the Kaiyuan Securities report are as follows.
1H 2026 results achieved rapid growth, with integrated synergies effectively controlling costs
Driven by a sharp rise in the average selling price of mined gold, the company recorded revenue of RMB1.368 billion in 1H 2026, up 45.79% year on year, and net profit attributable to shareholders of RMB454 million, up 45.29% year on year (using historical exchange rates for the corresponding years). After completing the vertical integration of two mine engineering companies, Xi'an Hongshang and Longxin Construction, the company achieved significant cost reductions in mining and excavation engineering, with a gross margin of 62.86% in 1H 2026, up 11.33 percentage points year on year.
Strategic layout in the Tongguan and Subei gold mining areas, with excellent gold resource endowments
The company has excellent gold resource endowments. The Tongguan area has formed a concentrated and contiguous pattern, with Xiangshun Mining as the main producing force, while Tongxin, Dexing and Tongjin Mining provide support for future gold output growth, giving the company notable cluster and synergy advantages. In the Subei mining area, the Beidong gold mine and the 460 gold mine are only about 320 metres apart in a straight line, offering the advantage of shared beneficiation and smelting infrastructure and providing a solid resource guarantee for subsequent capacity expansion.
Mining scale achieved leapfrog growth, while improved ore processing capacity ensures steady gold volume growth
Since acquiring Beidong Mining in 2023, the company's mining volume has been released at an accelerating pace, with gold ore mining rising from 192,700 tonnes in 2022 to 627,200 tonnes in 2025, daily ore processing capacity increasing to 3,500 tonnes, and annual gold output rising from 0.91 tonnes to 2.78 tonnes. In 1H 2026, the company's average mining grade was 5.52 g/t, achieving gold output of 1.54 tonnes, up 15.92% year on year, with an average selling price of RMB965 per gram and an all-in sustaining cost of RMB409 per gram.
Risk warnings
Operational safety production risks; product price fluctuations exceeding expectations; project construction falling short of expectations.
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