Silvercorp Metals Inc

Silvercorp Metals Inc (TSX: SVM) is a mining company based out of Canada. The Group is engaged in the business of production of zinc, lead and silvers metals from mines in the Chinese region. SVM operates in mines located in Henan Province and Guangdong Province in China.

Financial Highlights – Q1 Financial Year 2021 (30 June 2020, USD, thousand)

(Source: Quarterly Report, Company Website)

In the first quarter of the financial year 2021, driven by higher sales from Henan Luoning for the period, the sales increased to USD 46,705 thousand (Q1 FY2020: USD 45,576 thousand). Driven by lower cost of mine operations, the income from mine operations stood at USD 19,285 thousand in Q1 FY2021 (Q1 FY2020: USD 17,733 thousand). The Group’s operating income stood at USD 23,074 thousand in the first quarter of the financial year 2021 (Q1 FY2020: USD 16,059 thousand), reflecting higher sales and lower operating expenses for the period. The profit before income tax stood at USD 23,874 thousand in the first half of the financial year 2021 (Q1 FY2020: USD 16,813 thousand). The net income increased to USD 18,492 thousand in Q1 FY2021 (Q1 FY2020: USD 17,301 thousand). The basic and diluted earnings per share stood at 0.09 cents for the Q1 of financial year 2021 (Q1 FY2020: 0.07 cents). The cash balance as on 30 June 2020 stood at USD 94,024 thousand versus USD 65,777 thousand as on 31 March 2020.

Share Price Performance

SVM 1 Year Daily Technical Chart. Source: Refinitiv, Thomson Reuters

Silvercorp Metals Inc shares closed at CAD 10.25 at the time of writing after the market close on 13 August 2020. Stock's 52 weeks High is CAD 11.34 and Low is CAD 2.12.

Key Risks

Any change in regulations and government policies could affect the overall business of the Company. Liquidity and interest rate risks could affect the operations of the Company. The market conditions in which the Company operates is full of challenges and might impact the operation performance and reduce financial performance as well.

Conclusion

The Company has shown an improvement in financial performance in the first quarter of the financial year 2021. Both the top-line and the bottom-line performance have improved, with an increase in the profitability margins for the period. The liquidity position has improved, and the balance sheet remained well-positioned. The recent drilling program at Ying Mining District for mineralization of gold will help the Company to increase financial performance further as gold prices in the global markets are showing improvements. SVM is actively seeking acquisitions to achieve growth in the long-term period. The Group operations are impacted by the outbreak of covid-19 pandemic and have been focusing on strengthening balance sheet and return with capital discipline and reducing costs to preserve cash.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of CAD 10.25 (as on 13 August 2020).

Disclaimer

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