Key points of investment:
Resource giants continue to grow, and their performance has reached a record high
Luoyang Molybdenum has continued to expand mine resources and production since its listing, and is the world's leading producer of tungsten, cobalt, niobium, molybdenum and copper. After the company's equity issues were resolved in 2023, the TFM project and KFM project were successfully scaled up, and the company's performance reached a record high. The company achieved revenue/net profit to mother of 186.269 billion yuan/8.250 billion yuan respectively in 2023, which was +7.68%/+35.98% year-on-year respectively.
Copper supply and demand expectations are tightening, and cobalt may subsequently become scarce
On the copper side: The concentration on the supply side is high. After 2015, the capital expenditure of copper companies is insufficient, and the future growth rate of copper ore supply may be slow; the demand side is expected to be driven by the development of new energy sources. Currently, smelting costs have continued to be low. In the future, supply and demand may be tightened year by year, and copper prices are expected to remain high. On the cobalt side: In the short term, due to the volume of cobalt projects in the Democratic Republic of the Congo (DRC) and Indonesia, there is a certain excess supply; in the future, electric vehicles are expected to become the driving force behind the increase in demand for cobalt, and supply may become scarce after 2025.
Copper and cobalt provide the main driving force for growth. Molybdenum, tungsten, niobium, and phosphorus provide stable profits. In 2023, the company's production of all products achieved year-on-year growth, including 419,500 tons of copper (51% increase), 55,500 tons of cobalt (increase of 174%), 15,600 tons of molybdenum (3% increase), and 0.95 million tons of niobium (increase of 3%). The company's copper production is close to the top ten in the world, leading the world in cobalt production, and the production of molybdenum, tungsten and niobium. According to the company's five-year development goals, the company's annual output is expected to reach 800,000 to 1 million tons of copper, 90,000 to 100,000 tons of cobalt, 25,000 to 30,000 tons of molybdenum, and more than 10,000 tons of niobium in the future.
Profit forecasting and investment advice
Under a neutral scenario, we expect the company's 2024-2026 net profit to be 100.15/112.38/12.261 billion yuan, EPS 0.46/0.52/0.57 yuan/share, respectively, and the corresponding PE is 17.62X/15.70X/14.39X, respectively. The company has high-quality resources, and its performance is expected to be fulfilled under the expectations of an increase in production scale and continued industry prosperity. For the first time, coverage was given an “increase in weight” rating.
Risk warning
Product price fluctuation risk, safety and environmental risk, macroeconomic environment and industrial policy risk.