Core views:

In '22, the company increased revenue, controlled costs and reduced fees, which helped the return mother's net profit increase 178.6% over the same period last year. According to the company's annual report, in 2022, Yunnan Copper achieved total operating revenue of 134.92 billion yuan, an increase of 6.2% over the previous year, gross profit increased 1,364 million yuan year on year, expenses decreased by 418 million yuan year on year, net profit returned to the mother was 1.81 billion yuan, up 178.6% year on year, net profit of 1.81 billion yuan after the previous year, up 395.0% year on year. Basic earnings per share were 1.03 yuan/share, up 171.0% year on year, net operating cash flow of 6.08 billion yuan, up 19.9% year on year, and balance ratio was 59.84%, down 59.84% year on year 6.26PCT, capital structure optimization.

The company's copper smelting production was relatively stable in '22, and copper concentrate production declined, increasing its holdings in Diqing Nonferrous Metals to increase future performance. According to the company's annual report, in 2022, the company's consolidated calibrated production of copper concentrate, electrolytic copper, gold, silver, and sulfuric acid reached 62,600 tons, 1,3492 million tons, 17.04 tons, 646.13 tons, and 4.807 million tons, respectively, with year-on-year changes of -17.31%, 0.14%, -5.96%, -4.36%, 3.60%. The recovery rate of mineral copper, gold and silver, the total recovery rate of copper smelting, and the complete processing cost of mining and smelting units increased, respectively. The physical labor productivity of mines and smelters increased, respectively. 3.47% , 4.49% In November 2022, the company increased its holdings of non-ferrous metals in Diqing through a fixed increase. The shareholding ratio increased from 50.01% to 88.24%, while Diqing Nonferrous Metals reduced production of copper concentrate by 12,500 tons.

Profit forecasts and investment recommendations. The company's 2023-2025 EPS is expected to be 1.69/1.92/1.97 yuan/share, corresponding to the closing price on April 18, 2023, and the 2023-2025 PE will be 8.02/7.06/6.87 times. Referring to comparable company valuations, the company will be given 11 times PE in 2023, corresponding to a reasonable value of 18.60 yuan/share in 2023, giving it a “buy” rating.

Risk warning. Production of major products fell short of expectations; copper prices fell sharply; supply of copper concentrates from overseas fell short of expectations, and copper processing fees fell sharply; the resilience of the US economy exceeded expectations, and gold and silver prices rose lower than expected.