Introduction to this report:

The pace of the company's Q4 copper and cobalt production and sales accelerated. Coupled with the sale of Australian NPM copper and gold mine assets to increase profits, the 2023 performance release exceeded expectations. The company's copper and cobalt production continued to grow in 2024, and the performance gains can be expected.

Key points of investment:

Maintain the “increase in holdings” rating and raise the target price to 8.93 yuan. Taking into account the company's proceeds from the sale of NPM assets, as well as the confirmed sales pace and product price of the Congolese gold, copper and cobalt sales, the company's 2023-2025 EPS was 0.38/0.50/0.55 yuan (originally 0.35/0.48/0.51). Referring to comparable company valuations, considering the company's accelerated volume, it was given 18x PE in 2024, and the target price was revised to 8.93 yuan.

Q4 The pace of production and sales accelerated, and the sale of NPM assets increased profits. The performance slightly exceeded expectations. The company initially calculated revenue of 18.27 billion yuan in 2023, +8% year on year, net profit to mother of 8.25 billion yuan, +35% year on year, net profit without return to mother of 6.23 billion yuan, +3% year on year. Among them, Q4 revenue was $54.59 billion, +35% YoY, +21%, and net profit to mother was 5.81 billion yuan, +663% YoY, +234%. Thanks to the accelerated pace of Congolese gold production and sales and NPM's investment income, the company's Q4 performance release slightly exceeded expectations.

Copper and cobalt production and sales are on track, and the 24-year volume increase is expected to continue. In 2023, the company sold 42.0/56,000 tons of copper and cobalt, +51%/174% year-on-year. Among them, Q4 copper and cobalt production was 15.2/18,000 tons, up 38%/2% from the previous month, respectively. After the equity fund landed, the company's exports of Congolese gold gradually resumed, and the pace of Q4 production and marketing accelerated to release performance. At present, all 3 TFM mixed mine production lines have reached production, and KFM was also put into operation in 23Q2. The company plans to produce 52-570,000 tons of copper/cobalt and 60,000 tons respectively in 24, increasing copper/cobalt production capacity by more than 10/10,000 tons over the same period last year, and the high increase in production is expected to continue.

Expectations of interest rate cuts are heating up, demand expectations are improving, and I am optimistic that copper prices will operate at a high level. There are signs that the US inflation/economy is weakening. Expectations of the Fed's interest rate cut are heating up, while steady domestic growth continues to gain strength, compounded by supply disturbances at the mining side. Copper prices are expected to continue to operate at a high level under tight supply and demand.

Risk warning: Copper and cobalt prices fluctuate greatly, and the release of TFM and KFM expanded production capacity was delayed.