Description of the event
China Mining Resources released its 2023 three-quarter report. The first three quarters of 2023 achieved operating income of 5.05 billion yuan, -9% year-on-year; net profit of 2.07 billion yuan, +1% year-on-year; net profit of 2,025 billion yuan after deduction of net profit of 2,025 billion yuan, +1% year-on-year. 2023Q3 achieved operating income of 1,404 billion yuan, -32%, -8%; net profit of 568 million yuan, -22%, +40%; net profit of 535 million yuan, minus net profit of 535 million yuan, -26% year-on-year, +38% month-on-month.
Incident comments
In the first three quarters of 2023, under the downward trend in lithium prices, the company's performance bucked the trend and increased slightly year-on-year. According to SMM, the average price of battery-grade lithium hydroxide in the first three quarters of 2023 (including tax) was 307,500 yuan/ton, or -31% year-on-year; the average price of battery-grade lithium carbonate (including tax) was 297,800 yuan/ton, -35% year-on-year. In the first three quarters of 2023, the company achieved a gross profit margin of 61.65%, a year-on-year +12.13pct; a net profit margin of 41.36%, a year-on-year +3.99pct. Although lithium prices have dropped sharply this year, along with the gradual release of the company's own resources, the self-supply rate of resources has increased, production costs have decreased, and the company's profitability has bucked the trend.
Looking at the third quarter alone, the increase in the self-supply rate of resources combined with a reduction in integrated production costs contributed to a month-on-month increase in the company's Q3 performance.
According to SMM, the average price of 2023Q3 battery-grade lithium hydroxide (including tax) is 223,700 yuan/ton, -15% month-on-month; the average price of battery-grade lithium carbonate (including tax) is 247,700 yuan/ton, -5% month-on-month. Although judging from the product structure, the company's production and sales of lithium hydroxide are mainly affected by the weak recovery in ternary demand compared to lithium iron. The decline in lithium hydroxide prices in the third quarter was greater than that of lithium carbonate, which suppressed the profitability of the lithium sector, but along with the rise in the volume of its own Bikita mine while the impact on exchange profit and loss decreased, the company's integrated production costs decreased, which in turn made lithium salt performance in the third quarter impressive.
The company's smelting capacity expanded at an accelerated pace, and the resource side achieved complete self-supply, and Alpha was remarkable. On the resource side, the Bikita mine's 2 million tons/year lithium permeable feldspar renovation and expansion project and the 2 million tons/year spodumene construction project are climbing. The two projects are expected to produce 300,000 tons of chemical-grade lithium permeable feldspar concentrate and 300,000 tons of spodumene concentrate per year after delivery. The new 1 million ton/year beneficiation project at the Tacno mine is expected to be put into operation by the end of 2024. On the smelting side, the new high-purity lithium salt project with an annual output of 35,000 tons is expected to be put into operation in the fourth quarter of 2023. At that time, the company will have a total battery-grade lithium salt production capacity of 66,000 tons/year. Against the backdrop of falling lithium prices, the company relied on the release of its own resources, improved ore quality, gradual reduction in production costs, and full profit resilience. At the same time, driven by the rapid growth in downstream demand, the rubidium cesium sector is expected to enjoy both cake and share growth at the same time, making a steady contribution to the company's performance.
Risk warning
1. Demand for new energy fell short of expectations, and metal prices fell sharply; 2. The impact of production safety risks; 3. The risk of overseas resource allocation was rising, and the company's project commissioning fell short of expectations; 4. Risk of exchange rate fluctuations.