The company is a large state-owned enterprise that lays out the entire industrial chain of the copper industry. Tongling Nonferrous is the earliest copper industrial base built in New China. The company was listed on the Shenzhen Stock Exchange in November 1996. It is a full-industry copper enterprise integrating copper mining, copper smelting, and copper processing. The actual controller is the Anhui Provincial State-owned Assets Administration Commission. It currently has a copper smelting production capacity of 1.7 million tons. The domestic copper mine currently produces about 50,000 tons of copper per year.
The Mirador copper mine was merged, and the mine's copper production increased dramatically. In August of this year, the company acquired the Mirado Copper Mine in Ecuador, the world's largest copper mine owned by the controlling shareholder. The amount of copper metal discovered and controlled by the Mirador copper mine exceeds 6 million tons, with an actual mining grade of 0.6%. It was developed in two phases. Currently, the first phase is fully produced, with an annual output of 121,000 tons of copper and a net profit of 1.84 billion yuan. The cost excluding three fees is 28,000 yuan/ton, which is 30%-40% above the global copper cost curve; the second phase of the project will be put into operation in the second half of 2025, and is expected to produce more than 140,000 tons of copper per year. After the Mirador copper mine is fully produced, it is expected to rank among the top 20 copper mines in the world. Tongling Nonferrous Metals will also become the top three copper producers of A-share listed copper companies.
The smelting production capacity has outstanding location advantages, low cost, and strong profitability. The company now has 4 copper smelting bases with a refining capacity of 1.7 million tons. The scale is second only to Jiangxi Copper in China and the top four in the world. The main smelters, Jinlong Copper and Jinguan Copper, are all located along the Yangtze River, with low transportation costs, close to mainstream consumption, easy consumption of sulfuric acid as a by-product, and outstanding location advantages. It is one of the most profitable copper smelters in China. Currently, a new 500,000 ton smelter is under construction. It is expected to start production in 2025, and the smelting capacity will increase to 2.2 million tons.
The scarcity of copper resources has been highlighted, and the focus of copper prices has risen. The grade of global copper mines has declined markedly over the past 20 years, and mining costs have risen year by year. Since the peak of the previous cycle 10 years ago, mining capital expenditure has been insufficient, leading to a decline in the growth rate of copper production. It is also expected that global copper production will peak in 2025, and the gap between supply and demand will widen thereafter. The scarcity of large-scale copper mines in production is becoming more and more prominent. The current incentive price for copper mines is over 8150 US dollars/ton, which will effectively support copper prices, and low-cost copper mines will maintain high profitability.
Profit forecast and valuation: Assuming the 2023-2025 LME copper price is 8520/8500/8500 US dollars/ton, and the copper concentrate processing fee is 88/80/80 US dollars/ton, the estimated 2023-2025 revenue is 1421/1466/164.3 billion yuan, a year-on-year growth rate of 16.6/3.2/ 12.1%, net profit of 37.88/43.26/5.683 billion yuan, year-on-year growth rate of 38.7/14.2/ 31.4%; diluted EPS is 0.30/0.34/0.45 respectively Yuan. The current stock price corresponding to PE is 9.9/8.7/6.6x, respectively. The company is the leading copper smelter in China, leading the smelting profitability industry. The Mirador copper mine will be in the production capacity release period for the next 3 years. Taking advantage of the high boom cycle in the copper industry, the company's profit growth rate will be significantly increased. Through multi-angle valuation, it was obtained that the company's reasonable valuation range is 3.7-4.4 yuan, corresponding to a market value of about 474-56 billion yuan. Compared with the current market value, there is a premium of 26%-49%.
For the first time, coverage gave the company a “buy” rating.
Risk warning: The progress of new construction projects is lower than expected; the risk of a sharp decline in copper prices due to macroeconomic and risk events at home and abroad; the risk of a sharp decline in copper smelting and processing costs; and the risk of falling sulfuric acid prices.