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Roth Capital lifts target for Silvercorp Metals after strong first quarter, says stock undervalued

The quarter saw the group produce 1.9 million ounces of silver, 1,000 ounces of gold, 7.3 million pounds of zinc, and 17.8 million pounds of lead

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Production for the three month period represented a 'significant beat', said Roth analyst Joe Reagor

Roth Capital repeated a 'Buy' rating on Silvercorp Metals Inc (TSE:SVM) (NSYEAMERICAN:SVM) and raised its price target to US$4.50 from US$4.25 after the China-focused miner's first quarter results surpassed expectations.

Production for the three months represented a 'significant beat', Roth analyst Joe Reagor said in a note to clients, coming in at 1.9 million ounces of silver, 1,000 ounces of gold, 7.3 million pounds of zinc, and 17.8 million pounds of lead.

READ: Silvercorp Metals sees healthy boost to silver, lead, and zinc metals sold as it reports 1Q results

That compared to the broker's estimates for 1.7 million ounces silver, 700 ounces gold, 5.9 million pounds of zinc, and 17.6 million pounds of lead.

Reagor also pointed out: "Revenue of US$45.6 million was slightly above our estimate of US$45.5 million, while EPS of US$0.07 beat our US$0.05 estimate."

"Additionally, we note if not for a build in finished goods inventory, financial results would likely have been even better, in our opinion."

Net income for the quarter was US$12.6 million, or US$0.07 per share, compared to US$10.9 million or US$0.06 per share in the same period a year earlier.

Silvercorp is the main silver producer in The People's Republic of China, with six silver-lead-zinc mines in the Ying mine district in Henan province, as well the silver-lead-zinc Gaocheng project in Guangdong.

Higher gold and silver forecasts

The Roth analyst noted that a portion of the target price rise was due to the broker's higher gold and silver forecasts for the remainder of calendar 2019, partially offset by lower base metals price forecasts. Meanwhile, the balance of the price target hike related to the better than anticipated fiscal Q1, 2020 results.

He said the broker believes Silvercorp is undervalued by the market.

Silvercorp shares added 1.87% in New York trade to US$3.81.

Contact the author at [email protected]

Quick facts: Silvercorp Metals Inc

Price: 9.86 CAD

TSX:SVM
Market: TSX
Market Cap: $1.72 billion
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