Incident: The company released its semi-annual report for 2023. In the first half of 2023, the company achieved operating income of 5.51 billion yuan, an increase of 12.52% over the previous year; realized net profit of 1,493 billion yuan, an increase of 124.49% over the previous year; achieved net profit of 1,488 billion yuan, an increase of 126.05% over the previous year.
Key points of investment:
The company's operating performance in the first half of the year was once again at the best level for the same period In the first half of 2023, the molybdenum market showed a volatile upward trend. In January-June, the cumulative average price of “MW” molybdenum oxide was 27.08 US dollars/pound of molybdenum, up 45% year on year; the cumulative average price of iron molybdenum was 274,100 yuan/ton, up 58% year on year.
By strengthening current production and operation, seizing market opportunities, adjusting the product structure in a timely manner, and strictly reducing costs and increasing efficiency, the company's business performance reached the best level in the same period in history. In the first half of 2023, the company's molybdenum ore mining, smelting and deep processing business revenue was 5.091 billion yuan, up 9.49% year on year; gross profit was 2,715 billion yuan, up 65.35% year on year; gross margin was 53.32%, up 18.01% year on year.
Recently, the supply and demand situation in the molybdenum market has been steady, moderate and positive. According to statistics from Antec, the price of molybdenum first fell and then rose in April, and the lowest price of 45% molybdenum concentrate fell to 2,570 yuan/ton in the middle of the month. With the continuous release of steel procurement, increased purchases of molybdenum concentrate, and mine tenders and shipments, the transaction price of molybdenum concentrate rebounded sharply. At the end of the month, the price of 45% molybdenum concentrate rose to 3,630 yuan/tonne; in May, the price of 45% molybdenum concentrate fell steadily in the second half of the month., demand was released, and the transaction price rose to around 3,800 yuan/ton at the end of the month ; The molybdenum market stabilized in June, and the price of 45% molybdenum concentrate fluctuated narrowly between 3660-3930 yuan/ton. The molybdenum market performed well in July, with little market fluctuation. The price of 45% molybdenum concentrate rose slightly from 3,850 yuan/tonne to 4,000 yuan/ton. As of August 25, under the impetus of rising raw material prices, steel mill tenders and procurement have increased. The amount of iron molybdenum produced by steel has exceeded 8,500 tons, the ferromolybdenum market activity has increased, and the price of iron molybdenum from around 278,000 yuan/base ton to around 2820,000 yuan/base ton; the bulk price of molybdenum iron has risen from 278-283,000 yuan/base ton to 282-287,000 yuan/base ton; the molybdenum chemical and deep-processing markets have remained stable, market inquiries have increased, prices of molybdenum chemical products and metal products have remained stable, and the price of ammonium tetramolybate has stabilized 27-27.2 million Yuan/ton, the price of grade 1 molybdenum powder is stable at 51.5-525,000 yuan/ton.
The company insists on being innovation-driven and takes scientific and technological innovation as the core. In the first half of 2023, the company continued to strengthen the management of scientific research projects, investing a total of 13.4.62 million yuan in R&D expenses, an increase of 11.67% over the previous year. The company continuously optimizes and enhances the level of technical management, revises process manuals for the entire industry chain, and ensures the compliant operation of the industrial chain. The company is steadily advancing the construction of “four modernizations”, and standardized implementation of projects such as automated research on ferromolybdenum packaging and online inspection research on production systems. Fourth, the “Qin Chuangyuan” platform construction master plan was formed, the Molybdenum Industry Innovation Center was established, and production line construction and layout plans for incubation projects such as “molybdenum alloy seamless thin-walled pipes,” “molybdenum alloy pipe targets,” and “ultra-fine molybdenum powder” have been basically determined. The company accelerated the transformation of technological achievements, and successfully overcame “stuck neck” technical difficulties such as 4N molybdenum powder, low oxygen molybdenum powder, alloy molybdenum products, and rolled sheets.
The construction of the company's key projects is progressing in an orderly manner. The land used for the company's mining upgrade project is being collected; the remaining 5,397 acres of land for the Wangjiaping tailings depot project have been re-registered; the overall beneficiation upgrade project is being further verified and optimized; the molybdenum roasting low concentration flue gas acid production upgrade project has completed planning permits and construction permits; the tank area foundation pit has been excavated, and all imported equipment and catalysts have been delivered.
Maintain the company's “increase in holdings” investment rating. It is estimated that the company's EPS after full dilution in 2023/2024/2025 will be 0.88 yuan/1.00 yuan/1.07 yuan respectively. Based on the closing price of 10.87 yuan on August 31, the corresponding PE will be 12.32 times/10.87 times/10.16 times, respectively.
The molybdenum supply side remains relatively stable. On the downstream demand side of the company, special steel and other industries have maintained steady growth, photovoltaic installed capacity and production and sales of new energy vehicles have maintained steady growth, supporting the price of molybdenum, and it is expected that the company's revenue and profit will continue to grow. Currently, the company's valuation level is relatively reasonable, taking into account the development prospects of the industry and the company's industry position to maintain the company's “increase” investment rating.
Risk warning: (1) the Fed's interest rate hike exceeded expectations; (2) international macroeconomic downturn; (3) geopolitical conflict intensified; (4) industry policy changes; (5) molybdenum and ferromolybdenum prices fluctuated greatly; (6) downstream demand fell short of expectations; (7) the company's production capacity supply fell short of expectations.