The company's net profit to mother fell 12.7% year over year in 2023. In 2023, we achieved revenue of 147 billion yuan (+8.9%), net profit attributable to mother of 15.8 yuan (-12.7%), net profit of 1.54 billion yuan (-15.1%) after deducting non-return to mother net profit of 1.54 billion yuan (-15.1%), and net cash flow from operating activities of 6.44 billion yuan (+6.1%). Among them, 2023Q4 revenue was 36.4 billion yuan (-1.2% YoY, -8.4% YoY), and net profit to mother was 61 million yuan (-88% YoY, -88% YoY). The sharp decline in 2023Q4 earnings was mainly due to depreciation of accrued assets. Company profit distribution plan: Based on a total share capital of 2 billion shares at the end of 2023, it is proposed to distribute a cash dividend of 3 yuan (tax included) to all shareholders for every 10 shares, for a total cash dividend of RMB 600 million.

Accumulated asset impairment: Southwest Copper Branch was relocated and upgraded, and the old installation calculated long-term asset depreciation of 50 billion yuan; the amount of resources available in the Chuxiong Mining and Metallurgy Liutuo Copper Mine was reduced to 210 million yuan; the estimated inventory price reduction was 120 million yuan, for a total of 830 million yuan.

The drop in sulfuric acid prices dragged down performance. The company's gross profit in 2023 was 6.07 billion yuan, a year-on-year decrease of 460 million yuan. Among them, the copper sector was 3.79 billion yuan, an increase of 370 million yuan over the previous year, mainly due to the increase in TC costs for copper smelting and processing; benefiting from rising precious metals prices, the precious metals sector increased its profit by 580 million yuan. The profit reduction item is mainly sulfuric acid. The sulfuric acid market price plummeted in 2023, and the gross profit of the company's sulfuric acid business changed from 1.19 billion yuan in 2022 to a loss of 50 million yuan.

High quality asset injection for majority shareholders: Before November 29, 2026, the process of injecting the majority shareholders' shares in Liangshan Mining Co., Ltd. into Yunnan Copper will begin. The majority shareholders hold 40% of Liangshan Mining's shares, and the listed company holds 20%. Liangshan Mining's net profit in 2023 is 600 million yuan. After the injection, the listed company will hold 60% of Liangshan Mining's shares. The Liangshan Mining Lala Copper Mine produces about 13,000 tons of copper concentrate per year. In addition, Liangshan Mining's Hongnipo copper mine started construction in May 2022, with a total investment of 1.85 billion yuan. After completion, the mine was completed in the second half of 2025. After completion, the mine had an annual mining scale of 1.98 million tons, with a copper metal volume of 26,000 tons/year.

Risk warning: the risk of a sharp drop in the price of copper or sulfuric acid, and the risk of production reduction in old mines.

Investment advice: Maintain an “increase in holdings” rating.

We assume that the 2023-2025 spot price of copper is 69,000 yuan/ton, copper concentrate TC is 60/70/70 US dollars/ton, sulfuric acid price is 150 yuan/ton, gold price 500 yuan/gram, and silver price is 5,800 yuan/kg. The estimated net profit for 2024-2026 is 20.18/23.08/3.109 billion yuan, a year-on-year growth rate of 27.8/14.4/ 34.7%; the current stock price is 1.01/1.15/1.55 yuan, respectively. 14.0/12.3/9.1x. Taking advantage of the boom cycle in the copper industry in recent years, the company's asset quality has improved and cash flow is strong. As the only copper listing platform under the China Alcoa Group, the majority shareholders can be expected to inject high-quality assets and maintain an “increase in holdings” rating.