Key points of investment
Event: The company released its 2023 three-quarter report. The first three quarters achieved operating income of 8.853 billion yuan, an increase of 25.29% over the previous year, net profit of 2,337 billion yuan, an increase of 140.11% over the previous year, and net profit of 2,318 billion yuan after deducting non-return net profit of 2,318 billion yuan, an increase of 141.88% over the previous year. Among them, in the third quarter, the company achieved operating income of 3.343 billion yuan, a year-on-year increase of 54.13%/16.64%, net profit of 844 million yuan, a year-on/month-on-month increase of 174.03%/27.88%, and net profit deducted from the mother of 830 million yuan, an increase of 176.67%/25.95% year on year. The company's performance is in line with expectations.
The rise in molybdenum prices has boosted the company's performance. The increase in the company's performance was mainly due to the large year-on-year increase in molybdenum prices in the first three quarters. The average price of Q1-Q3 for molybdenum concentrate (45%) was 4748/3424/4117 yuan/ton, respectively, up 158.66%/125.61%/190.70% year on year. In addition, the company's investment income increased by 50 million yuan compared to the same period last year, asset impairment loss/credit impairment loss narrowed by $0.15/039 million compared to the same period last year, and gross margin and net profit margin increased from 34.77%/16.65% in 2022 to 47.92%/29.86%.
The share of three fees has declined. In terms of expenses, the company's sales/management/finance/R&D expenses in the first three quarters were 0.26%/3.85%/-0.23%/2.11%, with year-on-year changes of -0.03/-1.00/+0.35/- 0.06pct; the total cost rate was 5.98%, a cumulative decrease of 0.73 pct.
Molybdenum resources are abundant. The company currently operates two major molybdenum mines, the Jinduicheng Molybdenum Mine and Ruyang Donggou Molybdenum Mine. The Jinduicheng Molybdenum Mine is one of the top six primary molybdenum mines in the world, with 465 million tons of ore resources, an average grade of 0.083%, and a service period of 35 years; Ruyang Donggou molybdenum mine has 471 million tons of resources, an average grade of 0.120%, and a service life of 57 years; participating mines include Tianchi Molybdenum Industry and Shapinggou Molybdenum Mine, which is currently under construction.
Investment suggestions: Although there has been a pullback in molybdenum prices since October, the outlook for special steel demand is expected to maintain steady growth. The major trend of manufacturing upgrading in domestic and foreign developing countries remains unchanged. We expect the company to achieve operating income of 112.03/131.83/13.953 billion yuan in 2023/2025, an increase of 17.54%/17.67%/5.84%, respectively; net profit is 29.31/32.49/3,513 billion yuan, respectively, up 119.57%/10.86% /8.12 %, corresponding to EPS, is 0.91/1.01/1.09 yuan, respectively.
Based on the closing price of 9.98 yuan on November 3, 2023, the corresponding PE for 2023-2025E is 10.99/9.91/9.17 times, respectively. Maintain the company's “increase in holdings” rating.
Risk warning:
Molybdenum price fluctuation risk, industry overcapacity risk, technology iteration risk, etc.