Incident: The company released its 2022 annual report. In 2022, the company achieved revenue of 134.915 billion yuan, +6% year on year, net profit of 1,809 billion yuan, +179% year on year, after deducting net profit of 1,811 million yuan from non-return mother, +395% year on year. Among them, Q4 achieved revenue of 36.863 billion yuan in a single quarter, +8% year on year, net profit of 327 million yuan, +156% year on year, after deducting net profit of non-return mother of 378 million yuan, +308% year on year.

Cost reduction and efficiency boosted the company's performance in 2022. In 2022, the company achieved a gross profit margin of 4.84%, a year-on-year rate of +0.77pct, a net interest rate of 1.97%, a year-on-year +0.95pct. During the reporting period, the company seized market opportunities, highlighted value creation, and effectively controlled costs and expenses. In 2022, the company's sales expenses rate was 0.17%, year-on-year -0.03 percentage points, management expenses rate (excluding R&D) 0.87%, -0.27 percentage points year on year, financial expense ratio 0.55% year on year, -0.18 percentage points year on year.

In 2022, the company's cathode copper, gold and silver production reached a record high, with better resource reserves to guarantee future growth. In 2022, copper concentrates produced 62,600 tons of copper, -17.31% year on year, cathode copper production was 1,349,200 tons, +0.14% year on year, sulfuric acid production was 4.807 million tons, +3.6% year on year, gold production was 1,7037 kg, -5.96% year on year, silver production was 646134 kg, -4.36% year on year. Currently, the company's main mines, such as the Pulang Copper Mine, the Dahongshan Copper Mine, and the Yangla Copper Mine, are mainly distributed in the Sanjiang Ore Formation Belt, and have good geological conditions for ore formation and potential for further prospecting. Among them, the production cost of Plang Copper Mine has a certain competitive advantage. By the end of 2022, Plang Copper Mine held 2,8853 million tons of copper metal, with an average grade of 0.33%. The Plang Copper Mine uses all-underground mining. The mining method is the natural collapse mining method. It is currently the largest natural collapse underground mine built and put into operation in China, and it is also one of the most advanced mines in China.

Investment advice: We expect the company's net profit to be 225, 28.3 and 3.718 billion yuan respectively in 2023-2025, EPS of 1.12, 1.41 and 1.86 yuan respectively, and corresponding PE of 12.23, 9.73 and 7.4 times respectively, maintaining the “recommended” rating.

Risk warning: The sales price of the company's main products fell short of expectations; project construction fell short of expectations; safety and environmental risks.