Incident: The company released its 2023 annual report on the evening of March 22, achieving revenue of 186.3 billion yuan, up 8% year on year; net profit to mother of 8.25 billion yuan, up 36% year on year; deducted non-net profit of 6.2 billion yuan, up 3% year on year.
The planned dividend for 2023 is $3.33 billion, with a dividend rate of 2.1% corresponding to the current stock price.
Comment:
The increase in net profit returned to mother in '23 was mainly due to an increase in sales volume in the copper sector. The copper-cobalt sector achieved gross profit of 11.14 billion yuan, or 6.58 billion yuan, accounting for 13% of gross profit, accounting for 62% of gross profit. Copper production was 394,000 tons, +55% year-on-year, and copper sales volume was 390,000 tons, +125% year-on-year. The reason why the increase in copper sales was greater than the increase in production was due to equity issues, and some copper products produced in '22 were not sold until '23. Cobalt sales volume was 30,000 tons, +62.0% year over year. The overall profit of other sectors remained flat. The molybdenum and tungsten sector achieved gross profit of 3.75 billion yuan, +81 billion yuan year on year; the niobium and phosphorus sector achieved gross profit of 1.54 billion yuan, compared with 1.26 billion yuan year on year.
23Q4 net profit to mother reached a record high, and the sale of NPM was rich. 1) After the equity issue was resolved in April 2023, exports of copper and cobalt products resumed. It generally took 3 months from mine sales to confirmation of revenue. 23Q4 confirmed the sales revenue of major copper and cobalt products for the whole year, and Q4 recorded a record high net profit. 2) The company divested the NPM copper and gold business segment and confirmed an investment income of US$252 million.
KFM and TFM copper production was successfully released, and copper production is expected to reach 600,000 tons in '25. 1) The KFM project was put into operation in the second quarter of 2023. The TFM mixed mine project successfully completed the construction of three production lines. The KFM and TFM projects produced 394,000 tons of copper in 23 years. Copper production is expected to reach 600,000 tons after production is completed in 2025. 2) According to the median annual report production guide, copper production in 2024 is expected to be 545,000 tons, an increase of 150,000 tons over the same period last year, +28%. Cobalt is 65,000 tons, molybdenum is 13,500 tons, tungsten is 70,000 tons, niobium is 0.95 million tons, and phosphate fertilizer is 1.15 million tons. 3) The company's five-year plan: achieve annual production of 800,000 to 1 million tons of copper metal, 90,000 to 100,000 tons of cobalt metal, 25,000-30,000 tons of molybdenum metal, and more than 10,000 tons of niobium metal.
I am optimistic about the central upward trend in copper prices in 2024. The copper sector faces long-term weak capital expenditure growth and declining copper ore grades, and future supply increases are limited; due to the disturbance rate, the copper supply release probability falls short of expectations, and the copper price center is expected to rise in 2024. In March 2024, the lowest TC for copper smelting and processing was 10.9 US dollars/dry ton, a record low in ten years. The decline in smelting and processing fees shows that copper supply is tight, and I am optimistic that copper prices will rise in 2024.
Profit forecast, valuation and rating: Based on the 2024/2025/2026 copper price of 8,732/8,994/9,264 US dollars/ton respectively, the net profit for 2024/2025 is expected to be 104/11 billion yuan (up 39%/27% from the previous time), adding a forecast of 11.1 billion yuan in 2026, an increase of 26%/5%/1% year-on-year. The PE corresponding to the current stock price is 16/15/15 times, respectively, maintaining the “increase” rating.
Risk warning: The decline in metal prices exceeded expectations, and the progress of production expansion fell short of expectations.