Profit growth was high in 2023. The company released its 2023 performance forecast. It is expected to achieve net profit of 85%-1.05 billion yuan in 2023, an increase of 27.57%-57.59% over the previous year; net profit after deduction is 856-1,056 million yuan, an increase of 27.5%-57.29% year-on-year.
Prices of main products have been steady, while shipping costs have declined. The average annual price of active iron ore contracts in 2023 was 847 yuan/ton, an increase of 10.3% over 2022. Yangtze River Nonferrous Metals 1 #铜年均价为68402元 /ton in 2023, up 1.3% from 2022. The average cost of Australian (Newcastle) -Qingdao Strait sea freight in 2023 was $13.37 per ton, down 10.7% from 2022.
The second phase of the PC copper mine was gradually put into operation and is expected to be fully completed and put into operation by the end of 2024. The first crusher in the crushing system of the Copper Phase II project in September 2023 has completed the installation and commissioning of machinery and equipment, and has entered the early trial production stage. The second phase is expected to be fully completed and put into operation by the end of 2024. The second phase has a design capacity of 11 million tons and a grade of 0.8%. Considering loss and recovery rate issues, it is expected to produce 70,000 tons of metallic copper per year. The first PC phase is at the end of mining, and production costs are high due to low-grade ore. Production costs are expected to decrease as the second phase of the PC is gradually put into operation and production.
Copper and iron ore prices are expected to rise under supply constraints. Supply side: It is difficult for the four major overseas iron ore mines to increase significantly in 2024. Copper production remains highly disruptive, and supply continues to fall short of expectations.
On the demand side, China and the US will simultaneously enter the active inventory replenishment cycle, and India's demand is growing at a high rate. The iron ore and copper market is expected to maintain a tight balance between supply and demand in 2024, and prices are expected to move further upward.
Investment suggestions: The company's main products are magnetite, copper and vermiculite. High-grade magnetite is produced stably at low cost, and the volume of the second phase of the copper mine project is improving growth. Under supply constraints, copper and iron ore prices are expected to rise further, and the company will benefit significantly. The company's revenue for 2023-2025 is estimated to be 69.08/7298/8.334 billion yuan, respectively, net profit to mother of 98/13.31/1,514 million yuan, and EPS of 1.47/2.04/2.32 yuan/share, respectively. The first coverage gave the company a “buy” rating.
Risk warning: Prices of main products have dropped sharply, and project progress and output releases fall short of expectations.