Event: Company Releases 2022 Annual Report

The company's performance growth trend was good, reaching a record high. In 2022, the company achieved revenue of 134.915 billion yuan, an increase of 6.18% over the previous year; net profit of 1,809 million yuan, an increase of 178.63% over the previous year; net profit of the non-return mother was 1,811 million yuan, an increase of 394.96% over the previous year.

By product, revenue from cathode copper/precious metals/sulfuric acid/other products was 101,423 billion yuan/11.022 billion yuan/1,941 billion yuan/20.529 billion yuan respectively, accounting for 75.18%/8.17%/1.44%/15.22% of total revenue respectively. Among them, cathode copper, as the company's largest business, contributed more than 50% of the company's gross profit. In 2022, the gross profit of copper products was 3.415 billion yuan, accounting for 52.28% of the total gross profit, and the gross margin was 3.37%.

Production of major products exceeded the target

The main products achieved high and stable production. In 2022, the company produced 62,600 tons of copper concentrate, 1,3492 million tons of cathode copper, 17.04 tons of gold, 646.13 tons of silver, 4.807 million tons of sulfuric acid; sold 1,711 million tons of cathode copper, 17.02 tons of gold, 1027.27 tons of silver, and 4.942 million tons of sulfuric acid.

The company's main mining copper companies are Diqing Nonferrous Metals, Yuxi Mining, Chuxiong Mining and Metallurgy, and Diqing Mining, which contributed 36,400 tons, 191,000 tons, 0.46 million tons and 0.25 million tons of copper concentrate production respectively.

In 2022, the company carried out mineral exploration activities and added 242,700 tons of copper resource metals above the presumptive grade. By the end of 2022, the company had 996 million tons of ore, 3.7456 million tons of copper metal, and an average copper grade of 0.38%.

The acquisition of 38.23% of Diqing Nonferrous Metals's shares was raised through private stock raising in 2022. In 2022, the Company invested a total of 26559.37 million yuan in fund-raising projects. Of these, the acquisition of 38.23% of Diqing Nonferrous Metals's shares held by Yuntong Group invested 1874.8533 million yuan, and supplementary working capital and repayment of bank loans amounted to 781.1317 million yuan. Up to now, the company holds 88.24% of Diqing Non-ferrous Metals's shares.

In 2022, Diqing Nonferrous Metals achieved revenue of 2,483 million yuan and net profit of 718 million yuan; it owned 87 million tons of ore, an average copper grade of 0.33%, equivalent to 2,8853 million tons of copper metal, and 2,546 million tons of copper metal equity.

Copper: Demand from traditional and emerging sectors resonates, opening up space for copper growth and bringing the Fed's interest rate hike to an end, which will help improve liquidity and promote the release of demand. Copper is an industrial metal, from a supply-side perspective, capital expenditure is insufficient; in addition to factors such as declining trends in copper ore grades and rising interference rates; new copper concentrates are expected to continue to decline in 2023-2025; from a consumer perspective, a series of domestic policies have been introduced to support consumption, and traditional fields such as real estate and power grids have continued to recover; emerging fields such as photovoltaics, new energy vehicles and other fields have developed rapidly in recent years, leading to a large increase in copper consumption demand; in combination with inventories, inventory levels are currently historically low, and the copper supply and demand gap is expected to expand significantly in the future until 2025. Copper supply gap It will reach 1.02 million tons, thus providing strong support for copper prices.

Profit forecasting

The company is expected to achieve operating income of 1443.83/1507.04/157.843 billion yuan in 2023/2024/2025, up 7.02%/4.38%/4.74%, respectively; the net profit of the mother is 2,796/28.14/32.24 billion yuan respectively, up 26.94%/22.57%/14.59%, respectively. The corresponding EPS is 1.15/1.40/1.61 yuan, respectively.

Based on the closing price of 13.55 yuan on April 20, 2023, the corresponding PE corresponding to 2023-2025E was 11.82/9.65/8.42 times, respectively. First coverage, giving a “buy” rating.

Risk warning:

Macroeconomics fell short of expectations; downstream demand fell short of expectations; capacity construction fell short of expectations.