Event overview: The company released a three-quarter report. 23Q1-Q3 achieved revenue of 467.325 billion yuan, yoy +17.70%, net profit of 8.184 billion yuan, yoy +21.94%; of these, Q3 achieved revenue of 132,866 billion yuan, yoy +23.20%, net profit of 966 million yuan, yoy +14.99%, which we believe is in line with market expectations. In the first three quarters, the company had a net operating cash flow of 22,477 billion yuan, an increase of 20.907 billion yuan over the same period last year. Cash flow was under pressure. We judge that the main short-term operating expenses were high, and the pace of accounts receivable recovery slowed down.
Orders for the first three quarters increased steadily year over year, and orders for the third quarter alone were under pressure. According to the company's operating data for the third quarter, 23Q1-Q3 signed a new contract amount of 981.93 billion yuan, yoy +5.0%. Of the new orders of 50 million yuan or more, housing construction/transportation and infrastructure/metallurgical engineering/ others signed new contract amounts of 4805.6/1469.9/1154.4/173.86 billion yuan respectively, yoy +3.1%/-3.7%/-4.8%/+29.7%, respectively. Among them, the amount of new contracts signed in the third quarter was 260.04 billion yuan, YOY -9.8%, and the amount of newly signed project contracts was 249.84 billion yuan. From July to September, the company signed 25 new projects with a single contract value of 1 billion yuan or more, for a total amount of 53.24 billion yuan.
Benefiting from the “Belt and Road”, overseas orders continued to rise. 23Q1-Q3, the company signed new overseas contracts worth 32.82 billion yuan, yoy +32.6%. According to the semi-annual report, the company successfully signed a 1.6 million ton joint steel plant project for the Anwar Integrated Steel Plant in Bangladesh (which will become a benchmark steel greenfield project in South Asia after completion); signed the Indonesian MMP nickel iron smelting EPC project (consolidates the company's leading position in the global industry in the field of laterite nickel ore smelting); and during the same period, it signed a number of high-end housing projects such as the Cambodia Huanhai Bolai International Hotel. According to the overseas edition of the People's Daily, Sino-foreign cooperation projects were signed on-site at the “Belt and Road” Entrepreneurs Conference, and the conference reached a project cooperation agreement of 97.2 billion US dollars (in the past 10 years, central enterprises have invested in more than 5,000 cooperation projects in 140 countries, with a total investment amount of more than 1 trillion US dollars). Among them, the Ruimu project team of China Metallurgical Group, which belongs to the group company, and Singapore General Battery and Metal Co., Ltd. signed a framework agreement on the supply of nickel and cobalt ore. On October 18, the 3rd “Belt and Road” International Cooperation Summit was held in Beijing. As a state-owned enterprise deeply participating in and implementing the “Belt and Road”, China Metallurgical is expected to achieve quantitative and qualitative breakthroughs in overseas business operations.
The resources sector expanded in an orderly manner, achieving a net profit of 1.01 billion yuan. According to the semi-annual report, in the first half of the year, the company's resource development business achieved revenue of 4.281 billion yuan, yoy +19.18%; realized net profit of 1.01 billion yuan, accounting for 12% of total net profit. Among them, nickel-cobalt, lead-zinc, and copper and gold mines achieved revenue of 27.9/29/5.3 billion yuan respectively; net profit attributable to China was 9.0/0.8/0.6 billion yuan, respectively. The Ruimu nickel-cobalt mine project in Papua New Guinea is estimated to hold 1.28 million tons of nickel resources and 140,000 tons of cobalt resources, with an average production rate of 103% in the first half of the year; it has produced a total of 1,800 tons of nickel and 1,514 tons of cobalt in nickel hydroxide. Sales of nickel hydroxide cobalt containing 16991 tons of nickel and 1,495 tons of cobalt containing cobalt. The Duda lead-zinc mine project in Pakistan estimates that it has 390,000 tons of lead resources and 840,000 tons of zinc resources. The average production rate for the first half of the year was 108%. The total production rate for the first half of the year was 108%. A total of 4,209 tons of lead concentrate and 2,082 tons of zinc concentrate were produced. Sales of lead concentrate containing 4861 tons of lead and zinc concentrate containing 16,964 tons of zinc. The Shandak copper and gold mine project in Pakistan is estimated to hold 1.85 million tons of copper resources; it has produced a total of 8573 tons of copper concentrate containing copper.
The Siadic copper mine project in Pakistan confirmed the detailed discovery of 3 million tons of copper resources. The production and sales volume of polysilicon in Luoyang in the first half of the year was 2650/2588 tons, respectively; the production and sales volume of new silicon-based materials products was 5,350 tons, achieving sales revenue of 443 million yuan (including 120 million yuan for new products) and net profit of 3.08 million yuan.
Profitability is under pressure, and internal control management has shown some results. The gross margin for the first three quarters was 9.2%, yoy-0.39pct; the gross margin for the third quarter alone was 9.1%, yoy-1.23pct, flat month-on-month. Net interest rates declined slightly by 0.01pct to 2.25%, while net interest rates fell 0.1 pct in the third quarter alone. The cost rate for the first three quarters was 5.17%, yoy-0.04pct. Among them, the sales/management/finance expense ratio changed year-on-year by -0.01pct/-0.11pct/+0.12pct, respectively, and the internal control effect achieved some results.
Investment advice
We maintain our profit forecast. The company's revenue for 2023-2025 is 6721.46/7645.62/874.568 billion yuan, and the predicted net profit is 124.18/141.13/17.616 billion yuan, corresponding to EPS 0.60/0.68/0.85 yuan/share, and the closing price of 5.46/4.80/ 3.85xPE on November 3, 2023. Maintain a “buy” rating.
Risk warning
There have been major changes in the international situation, downstream demand falling short of expectations, systemic risks, etc.