Key points of investment
Event: The company released the 2023 annual report and the performance forecast for the first quarter of 2024. In 2023, the company achieved operating income of 23.303 billion yuan, an increase of 10.75% over the previous year, and achieved net profit of 489 million yuan, an increase of 11.20% over the previous year. In Q4 2023, the company achieved revenue/net profit of 45.50/105 million yuan, a year-on-year change of -6.70%/+20.69%. In 2024, the company achieved net profit of 149-170 million yuan in Q1, an increase of 40%-60% over the previous year.
Volume: Discontinuation of production affects self-produced gold/antimony production. In 2023, the company produced a total of 47.70 tons/311,000 tons/941 standard tons of gold/antimonium/tungsten products, -0.75%/+1.33%/-53.71% compared with the same period last year. Among them, it produced 3.95 tons/17,500 tons/552 standard tons of gold/antimonium/tungsten concentrate, a year-on-year decrease of 14.38%/5.77%/65.59%. Among them, the decline in production of self-produced gold, antimony, and tungsten is mainly due to the impact of the suspension of production by subsidiaries. Currently, all discontinued mines have returned to normal.
Price: The price of gold and antimony continues to rise. The average price of SHFE gold and antimony ingots in 2023 increased 14.74%/4.69% compared to 2022, and the average price of gold and antimony ingots since 2024 has increased 10.18%/10.19% compared to the average price for the full year of 2023.
Profit: There was a slight decline in gross margin. In 2023, the company achieved gross profit of 1,658 billion yuan, an increase of 3.45% over the previous year, and a gross margin of 7.12%, down 0.5 pct from 2022, mainly due to an increase in the share of outsourced business. Among them, the gold business achieved gross profit of 800 million yuan, an increase of 18.04% over the previous year, while antimony products such as antimony oxide, refined antimony, antimony containing antimony, and ethylene glycol antimony achieved gross profit of 761 million yuan, a year-on-year decrease of 1.87%. In terms of cost, we estimate that after deducting the non-standard cash purchase business, the cost of own production was 235.76 yuan/gram, down 4.33% from 2022.
Gold and antimony are rich in reserves and have the advantage of scale. As of 2023, the company owns and controls 34 mining rights, including 21 prospecting rights and 13 mining rights, and is actively carrying out prospecting and storage expansion work. A total of 412 million yuan has been spent on excavation, 68 million tons of ore reserves, metals: 142 tons of gold, 3073 million tons of antimony, and 99,600 tons of tungsten. In terms of production capacity, the company has 100 tons/year gold production line, 25,000 tons/year refined antimony smelting production line, 40,000 tons/year multi-variety antimony product production line, and 3,000 tons/year ammonium paratungstate production line, which can give full play to the company's resource advantages.
Antimony production is expected to increase in 2024. In 2024, the company aims to produce 49.7 tons of gold, 36,000 tons of antimony products, and 1,800 tons of tungsten products, achieving sales revenue of 25.3 billion yuan. In June 2023, the subsidiary Xinlong Mining completed the registration of the Longshan Gold and Antimony Mine mining license change. In November, Gansu Jiaxin obtained mining licenses for the Yidinan Copper and Gold Mine and the Xiajanmucang Gold Mine issued by the Department of Natural Resources. Combined with the resumption of production at the original mine, production of gold and antimony is expected to further increase.
Optimistic about 2024 antimony price performance. We believe that the 2024 antimony price will continue to be strong. Gold prices benefit from factors such as the Federal Reserve's interest rate cut cycle and the intensification of geographical conflicts. The value preservation and safe-haven attributes are prominent, and the central bank's continued purchase of funds boosts demand for gold. Antimony prices continue to be tight in supply, demand for photovoltaics is strong, demand for holiday stocks drives up antimony prices in waves, and the price center rises steadily throughout the year.
Investment advice: Considering that the company's own mines will resume production in 2024, the Federal Reserve may enter a cycle of interest rate cuts in the second half of the year, and the price of gold and antimony is expected to reach a new high. We expect the company to achieve operating income of 271.19/286.31/29.969 billion yuan in 2024/2026, a year-on-year change of 16.38%/5.57%/4.67%, respectively; net profit to mother was 7.76/9.28/ 991 million yuan, respectively, up 58.63%/19.66%/6.79% year-on-year, respectively 0.65/0.77/0.82 yuan.
Based on the closing price on April 12, 2024, the corresponding PE corresponding to 2024-2026E was 23.80/19.89/18.62 times, respectively. Maintain the company's “buy” rating.
Risk warning:
Price fluctuation risk; risk of downstream demand falling short of expectations; risk of model assumptions not consistent with reality; risk of policies exceeding expectations, etc.