Key points of investment:
Incident: The company released its 2023 annual report: for the full year of 2023, the company achieved operating income of 186.27 billion yuan, +7.7% year on year; net profit to mother of 8.25 billion yuan, +36.0% year on year; net profit after deducting non-return to mother of 6.23 billion yuan, +2.7% year over year.
Increased mineral production+disposal business in Australian mining, with high annual performance. 1) Volume: In 2023, the company produced 420,000 tons of copper (Congo 39.4+NPM2.6), with sales volume of 415,000 tons (Congo 39+NPM 2.5), +172% year on year; cobalt production 56,000 tons, sales volume of 30,000 tons, sales volume 62% year on year; production of molybdenum was 16,000 tons, +3% year on year, sales volume of 16,000 tons, -2.9% year on year; tungsten production was 80,000 tons, +6% year on year, sales volume of 80,000 tons, +1.6% year on year. 2) Price: In 2023, the average price of LME copper was 8,525 US dollars/ton, -3.0%; the average price of MB standard grade cobalt was 15.8 US dollars/lb, -48.9%; the average price of ferromolybdenum was 256,000 yuan/ton, +37% year over year; APT average price was 179,000 yuan/ton, +3.1% year over year. 3) Profit: Net profit returned to mother in '23 plus 2.18 billion yuan year-on-year. Specifically, gross profit was +2 billion yuan year-on-year, mainly due to increased production and sales due to the commissioning of TFM and KFM projects; +1.8 billion yuan in taxes and surcharges, mainly due to increases in equity and resource taxes; +1.2 billion yuan in financial expenses, mainly due to the increase in interest expenses due to the US dollar interest rate hike; investment income +1.8 billion yuan, mainly from the Australian disposal business; and net income from fair value changes of +3.3 billion yuan, mainly due to the year-on-year increase in fair value changes in financial instruments derived from trade business.
TFM and KFM are expected to rank among the top ten copper producers in the world in 24 years. TFM currently has 5 copper and cobalt production lines, and is expected to reach production in 24Q1. KFM will maintain steady production and high production. In 24, copper production is expected to rise to more than 520,000 tons, and cobalt production is expected to increase to more than 60,000 tons, making it the top ten copper producers in the world. According to the company's latest 2024 business plan, the median copper production value was 545,000 tons, +30% year over year; the median cobalt production value was 65,000 tons, +16% year over year.
The company issued a five-year plan, demonstrating high growth. The company proposed development goals for the next five years, completed the goal of “moving to the next level” in the second step of the “three-step” strategy, and initially entered the ranks of world-class mining companies: achieving annual production of 80,000,000 tons of copper metal, 9,000-100,000 tons of cobalt metal, 25,000-30,000 tons of molybdenum metal, and more than 10,000 tons of niobium metal.
Profit forecast and investment advice: According to the latest annual report, we have adjusted the tax and surcharges ratio. The net profit for 24-26 is estimated to be RMB 119/129/13.5 billion yuan (value of RMB 112.3/12.20 billion before 24-25). Referring to comparable companies in the same industry, the company is given 18 times PE in 24 years, and the corresponding target price is 9.91 yuan, maintaining the “buy” rating.
Risk warning: the price of copper, cobalt and molybdenum falls short of expectations, the release of production capacity falls short of expectations, risk of changes in overseas policies