Event: The company publishes its 2023 annual report. The company achieved revenue of 186.3 billion yuan for the full year of 2023, an increase of 7.68% over the previous year, and achieved net profit of 8.250 billion yuan, an increase of 35.98% over the previous year, net profit deducted from non-return mother of 6.233 billion yuan, an increase of 2.73% over the previous year. The difference between net profit due to the disposal of the Australian business was mainly investment income obtained from disposal of the Australian business (about 1.7 billion yuan). Revenue and net profit rose across the board, thanks to the resolution of the equity incident and the breakdown in logistics in Africa, which boosted copper and cobalt sales. 2023Q4 achieved revenue of 54.587 billion yuan in a single quarter, an increase of 21.43% over the previous quarter; net profit to mother of 5.807 billion yuan, an increase of 233.72% month-on-month, and a year-on-year increase of 663.01%. The company's net operating cash flow was 15.5 billion yuan, which was basically the same; IXM achieved net profit of 913 million yuan to mother, an increase of 613% over the previous year, and the highest level in history.
Successfully completed the construction of two major world-class projects. ① The TFM hybrid mine was put into operation in October 2023 and has five production lines, forming an annual production capacity of 450,000 tons of copper and 37,000 tons of cobalt; it produces 283,300 tons of copper and 21,600 tons of cobalt for the whole year, up 10% and 7% year-on-year respectively, and achieved a net profit of 1.94 billion yuan in 2023. ② The KFM project produced benefits ahead of schedule in the first quarter of 2023, and fully achieved production in the second quarter. Annual production of 113,700 tons of copper and 33,900 tons of cobalt was achieved, and a net profit of 1,658 million yuan was achieved in 2023. Stock projects have fully met production standards, and incremental projects are progressing efficiently. In 2024, the company plans that TFM will make every effort to push forward the completion of the Eastern Region, achieve production in the first quarter, meet the standards in the second quarter, and maintain stable production. TFM and KFM complete the LME copper trademark registration, achieving annual copper production of more than 520,000 tons and more than 60,000 tons of cobalt; at the same time, it plans to expand production capacity in Africa and launch TFM Phase III and KFM Phase II expansion projects in due course.
Production of all metals has increased, and the company has entered the top ten copper producers in the world and remains the world's largest producer of cobalt. In terms of production, the Democratic Republic of the Congo (Gold) mining area (TFM and KFM) achieved copper production of 394,000 tons, a year-on-year increase of 55%, and cobalt production of 55,500 tons, an increase of 174% over the previous year. China's mining area achieved 15,635 tons of molybdenum production, an increase of 3% year on year, and production of tungsten production of 7975 tons, an increase of 6% year on year. The Brazilian mining area achieved 9515 tons of niobium, an increase of 3% over the previous year; the production of phosphorus was 1,168,200 tons, an increase of 2% over the previous year. Australia (NPM) achieved copper production of 25,552 tons, an increase of 13% year on year, and gold production of 18,771 oz, an increase of 16% year on year. In 2023, the company sold 80% of its interest in the NPM copper and gold mine and received huge profits. In terms of sales, sales of copper and cobalt products accelerated, with annual sales of 390,000 tons of copper and 30,000 tons of cobalt, up 125% and 62% year-on-year respectively. In terms of price, the average price of cobalt 1 in the Yangtze River nonferrous market in 2023 was 273,800 yuan/ton, down 36.0% year on year, while the average price of copper 1 in the Yangtze River nonferrous market was 68,400 yuan/ton, up 1.3% year on year. The gross margin of cobalt products in 2023 was 37.01%, a decrease of 44.92 pcts from 2022; the gross profit margin of copper products was 45.30%, an increase of 20.20 pcts over 2022. In terms of gross profit, the copper-cobalt sector achieved gross profit of 12.4 billion yuan, molybdenum and tungsten achieved gross profit of 3.8 billion yuan, and niobium and phosphorus achieved gross profit of 1.5 billion yuan.
According to our estimates, copper achieved gross profit per unit of 28,584 yuan/ton, cobalt 56,936 yuan/ton, tungsten 110,521 yuan/ton, molybdenum 18,3538 yuan/ton, niobium 93,911 yuan/ton, and phosphorus 555 yuan/ton.
The dividend plan was announced, and the dividend ratio was about 40%. On March 22, 2024, the board of directors of the company proposed a cash dividend of 1.5425 yuan (tax included) for every 10 shares to all shareholders. Based on the company's total share capital as of the end of 2023, the total amount of dividends paid at the end of 2023 is estimated to be approximately RMB 3.3 billion (tax included), and the cash dividend ratio is approximately 40%.
Profit forecast. TFM mine exports are smooth, and TFM's mixed mining project has been completed and put into operation. We expect full production in 2024. At the same time, the company plans to expand production capacity in Africa and launch TFM Phase III and KFM Phase II expansion projects in due course. Copper and cobalt production may continue to increase. We expect the company's net profit to be 10.7 billion yuan, 117, and 12.2 billion yuan respectively, with year-on-year growth rates of 29.8%, 8.9%, and 5.0%. As of March 25, 2024, PE corresponding to the closing price was 15.77x/14.49x/13.79x, respectively, maintaining a “buy” rating.
Risk warning: downstream demand for metals such as copper and cobalt falls short of expectations; exchange rate fluctuations bring uncertainty to the company's performance; risk of restrictions on exports of overseas products