The Mirador copper mine has abundant resource reserves: As of December 2022, the amount of resources held within the mining concession is 1453.29 Mt., of which the Mirador mine holds 761.19 Mt of resources and the Mirador Norte mine holds 692.1 Mt of resources. Among them, 51,600 tons of copper concentrate are produced, and the self-sufficiency rate is low, only 3.07%. With the continuous injection of high-quality resources such as the Mirador copper mine, the company's copper concentrate self-sufficiency rate is expected to increase significantly;
The green intelligent copper-based new materials project brought about an increase in production capacity: in September 2022, the company announced that it will invest in the construction of an integrated green and intelligent copper-based new material industrial park. The project will build a production capacity of 500,000 tons/year of high-end copper wire and 1.7 million tons/year of sulfuric acid as a by-product. The total land area is 900 mu, with a total investment of 10.3 billion yuan. It is expected to be completed by the end of 2025. After the completion of the project, the company's total smelting capacity will exceed 2 million tons;
Higher processing fees for copper concentrate: Increased profitability of the smelting business. In 2023, the long-term processing fee (TC/RC) for copper concentrate was 88 US dollars/ton, 8.8 cents/pound, an increase of 35% over the previous year, reaching a six-year high, and the company's smelting business capacity further improved.
Investment suggestions: The company is expected to achieve operating income of 1326.89/1366.34/153.241 billion yuan (23E down, 24/25E increase) in 2023/2024/2025, up 8.90%/2.97%/12.15%, respectively; net profit is 42.02/44.80/5.937 billion yuan (23-25E increase), respectively, up 53.92%/6.60%/32.54% year on year. The corresponding EPS is 0.33/0.35/0.47 yuan, respectively. Based on the closing price of 3.08 yuan on October 27, 2023, the PE corresponding to 2023-2025E is 9.28/8.71/6.57 times, respectively. Maintain a “buy” rating.
Risk warning: macroeconomics falls short of expectations, policy uncertainty; project progress falls short of expectations, etc.