2023H1's net profit from parent fell 24% year over year. 2023H1 achieved revenue of 53.4 billion yuan (+5.8%), net income of 295 million yuan (-24.2%), net profit of non-attributable income of 206 million yuan (-15.0%), and net operating cash flow of 3.05 billion yuan. 2023Q2's operating income was 29.3 billion yuan (+1.1%), net profit attributable to parent was 211 million yuan (-17.5%), net profit not attributable to parent was 191 million yuan (+42.1%). The decline in net operating cash flow in the first half of the year was related to the conversion of imported copper scrap to advance payments, and the company's production and sales volume bucked the trend in the first half of the year, and a slight decline in revenue ratio. Foreign exchange earnings for the first half of the year were 143 million yuan, compared to 47.6 million yuan for the same period last year.
Sales volume bucked the trend. In the first half of 2023, the company achieved a total output of 911,900 tons of copper and copper alloy materials, an increase of 7.75% over the previous year; foreign sales volume was 875,400 tons, an increase of 16.74% over the previous year. In the first half of 2023, the company sold 86,500 tons of copper products used in new energy vehicles, photovoltaics, wind power, etc., an increase of 10% over the previous year. Profit in the rare earth permanent magnet sector declined. Ketian Magnetic's net profit for the first half of the year was 35.9 million yuan, with a net interest rate of 5.8%. The net profit for the same period last year was 103 million yuan, and net profit was 15.7%. Similar to companies in the same industry of rare earth permanent magnets, profitability declined markedly.
Launched the 2023 Employee Stock Ownership Plan. No more than 474 people participated in this shareholding plan. Compared with the 26 people in the 2021 employee shareholding plan, it shows inclusiveness. The participants include company supervisors, middle managers and core cadres. Effective incentives for this group of personnel can truly enhance the work enthusiasm of the participants and unify the interests of the participants with the company and the company's shareholders, thus promoting the achievement of the company's overall goals.
Risk warning: Demand in incremental markets such as new energy vehicles falls short of expected risks; there is a risk that the price of copper or rare earth raw materials will fluctuate drastically; there is a risk that product gross margin will decline due to intense market competition.
Investment advice: lower the profit forecast and maintain the “increase in holdings” rating
Based on market conditions since the beginning of the year, we have lowered the company's shipment volume forecast and profit forecast. Referring to the price trends of major non-ferrous metals since the beginning of the year, assuming that 2023-2025 copper prices are 68,500 yuan/ton, it is estimated that the company's revenue in 2023/2024/2025 will be 1150/1250/138.4 billion yuan, with a year-on-year growth rate of 13.6/8.7/ 10.8%, and net profit of 6.95/9.03/1.148 billion yuan (original value of 7.34/9.66/1,237 billion yuan), with a year-on-year growth rate of 65.5/29.9/ 28.2%, EPS respectively 0.47/0.61/0.78 yuan. The PE multiples corresponding to the current stock price are 14.2/10.9/8.5, respectively. The company's two major businesses, copper processing and rare earth permanent magnets, are in a period of rapid expansion. Products continue to be upgraded, and have the advantage of recycled copper recycling. It fully benefits from the increased demand for copper and rare earth permanent magnet materials in the new energy market and maintains its “increase in holdings” rating.