The company published its 2022 semi-annual report. 2022H1, the company achieved revenue of 14.269 billion yuan, a year-on-year decrease of 38.3%; net profit of 741 million yuan, an increase of 3.9% over the previous year; net profit of non-return mothers was 749 million yuan, an increase of 65.7% over the previous year. 2022Q2, the company achieved revenue of 8.044 billion yuan, a decrease of 30.9% over the previous year, an increase of 29.2% over the previous year; the net profit of the mother was 366 million yuan, an increase of 23.5% over the previous year, a decrease of 2.4% over the previous year; net profit of the non-return mother was 297 million yuan, an increase of 19.6% over the previous year and a decrease of 34.3% from the previous month.
Product prices have declined, and the performance of the main business sector is under pressure. Volume: With the release of production capacity of the CCM copper-cobalt project, copper and cobalt production increased. 2022H1, the company's copper production was 26,200 tons, and the production of cobalt products was 5868 tons. The company expects copper production to reach 55,000 tons in 2022, cobalt production to reach 9,000-10,000 tons. The production of zinc-nickel projects is stable. 2022H1 produces 119,500 tons of zinc and 19,700 tons of nickel, achieving full production. Profit: 2022H1, the company achieved gross profit of 2,176 million yuan, an increase of 4.1% over the previous year and a decrease of 5.4% from the previous month, mainly due to the increase in overseas energy prices in 22Q2 and the rise in smelting costs. Among them, the company's copper, nickel, cobalt and other energy metal sectors achieved gross profit of 1,897 million yuan, an increase of 13.93% over the previous year, mainly due to rising overseas energy prices, rising smelting costs, and the zinc-germanium industrial metal sector achieved gross profit of 120 million yuan; the trade sector achieved gross profit of 120 million yuan.
Derivative financial assets increased sharply, and fair asset returns supported 22Q2 results. In the first half of 2022, metal prices were high, and the company's hedging demand was strong. 22Q2 derived financial assets were 187 million yuan, a sharp increase of 176 million yuan over the previous month, profit and loss from changes in fair value was 184 million yuan, a sharp increase of 315 million yuan over the previous month, making up for the decline in gross profit in the company's main business sector. Considering the leverage of derivative financial instruments, the company's assets of 187 million yuan of derivatives hedging may exceed 1.5 billion yuan. The price of the company's main products fell further in Q3, while derivatives assets locked in some product prices, which helped stabilize the company's Q3 performance.
Future highlights: 1) Supply disruptions are still ongoing, and product prices may gradually stabilize. Macro pressure has weakened, energy prices are high, electricity continues to be tight. The European energy crisis has led to a reduction in zinc production, and copper and zinc prices have gradually stabilized; demand for new energy vehicles is strong, while supply growth is slow, and there is limited room below nickel and cobalt prices. 2) Funding for fixed increase projects is in place, and capacity expansion is speeding up. Upstream: CCM30,000 tons of copper, 5,800 gold tons of cobalt hydroxide project production capacity continues to climb. The company plans to raise 2,255 billion yuan. The distribution work has been completed. The construction of the 30,000 tons of copper and 4,000 tons of cobalt in Kalonway will be accelerated and is expected to be put into operation by the end of 2022; Youshan Nickel has begun to partially switch to low-ice nickel, nickel products have entered the new energy vehicle industry chain, Shengmai Nickel's 40,000 ton nickel project is progressing actively, and the nickel sector project has entered the replication stage. Downstream: Colixin's high-end cobalt products will produce no less than 3,000 tons in 2022; the first phase of the 150,000-ton nickel sulfate project in Guizhou has passed the EIA and energy assessment, and infrastructure projects are under way. It is expected to be put into operation in the first half of 2023.
3) There is great potential to increase resource storage and enhanced upstream management and control capabilities. The Kalongwe and FTB projects are both located in the rich mineral belt, near large copper and cobalt mines. Prospecting prospects are good, and there is great potential for future storage growth.
Investment advice: In the context of high energy prices, supply disturbances are still there. Copper, cobalt, nickel and zinc prices may gradually stabilize. As production capacity is gradually released, the company's performance may continue to grow. We expect the company to achieve net profit of 1,440 billion yuan, 2,139 million yuan, and 2,844 billion yuan in 2022-2024. EPS is 0.51 yuan, 0.76 yuan and 1.01 yuan respectively. PE corresponding to the closing price on August 16 is 16, 11 and 8 times respectively, maintaining the “recommendation”
ratings.
Risk warning: energy prices have risen sharply, production capacity release falls short of expectations, downstream demand falls short of expectations, etc.
