Incident: The company released the 2023 Annual Report and the 2024 First Quarter Report. The 2023 performance grew steadily, and the 2024 Q1 performance declined slightly. The company's revenue for the full year of 2023 was 39.398 billion yuan, -18.30%; net profit to mother was 1,602 billion yuan, +10.75% year over year; net profit after deducting non-return to mother was 1,400 billion yuan, +13.29% year over year, and cash flow from operating activities changed positive from negative in '22. In the first quarter of 2024, the company's revenue was 8.270 billion yuan, -3.41% year on year; net profit to mother was 427 million yuan, -2.95% year on year; net profit after deducting non-return to mother was 301 million yuan, -23.27% year on year.
Tungsten and molybdenum are the cornerstone of performance growth in 2023, and the new energy materials and rare earth sectors were under pressure throughout '23. (1) Tungsten-molybdenum: In 2023, the company's main tungsten and molybdenum deep-processing products continued to grow. The sector achieved operating revenue of 16.463 billion yuan, +25.10% year over year; total profit of 2,348 billion yuan, +61.84% year over year. If the impact of the company's joint ventures was excluded, the company's tungsten and molybdenum business profit was +57.10% year-on-year. (2) Rare earths: In 2023, the rare earth industry was affected by the continued decline in raw material prices and increased market competition, and profitability declined sharply year-on-year. The company's rare earth business achieved revenue of 5.49 billion yuan, -10.59% year-on-year; total profit of 144 million yuan, or -54.54% year-on-year. (3) New energy materials: In 2023, the company's new energy materials business revenue was 17.311 billion yuan, -39.77%; the total profit realized was 559 million yuan, or -54.98% year-on-year. The company's annual sales volume of lithium cobalate products was 34,600 tons, +4.16% year on year; sales volume of ternary materials was 37,400 tons, -19.39% year over year.
Sales of ternary materials and lithium cobalate increased sharply in Q1 in 2024, short-term pressure on tungsten and molybdenum profits, and continued pressure on rare earths.
(1) Tungsten-molybdenum: In the first quarter of 2024, the company's tungsten and molybdenum business achieved revenue of 4,047 million yuan, +9.81% year-on-year; total profit of 540 million yuan, -4.59% year-on-year. Excluding the impact of joint ventures, the company's tungsten and molybdenum business profit was -3.21% year-on-year. The main reason for the decline in profits is that the production, sales volume and price of molybdenum trioxide, a by-product of the company's tungsten smelting, declined to a certain extent over the same period last year, and profits in the tungsten smelting process decreased. (2) Rare earths:
In the first quarter of 2024, the company's rare earth business achieved revenue of 912 million yuan, -26.66% year-on-year; total profit of 40 million yuan, or -64.79% year-on-year. (3) New energy materials: In the first quarter of 2024, the company's new energy battery materials business achieved revenue of 3.299 billion yuan, a year-on-year decrease of 8.02%; total realized profit of 114 million yuan, a year-on-year decrease of 5.31%. In 2014, Q1 continued to explore the ternary materials market, achieving sales volume of 15,900 tons, +249% year over year; sales volume of lithium cobalate products was 0.84 million tons, +62% year over year.
Investment advice: As new projects in the three major sectors of the company are gradually completed and put into operation, and market demand for new energy sources continues to rise, the company's product production and sales are expected to increase rapidly, driving the company's performance to grow. The company's revenue for 2024-2026 is estimated to be 435.16/497.34/54.939 billion yuan, respectively, and net profit to mother is 18.44/23.42/2,683 billion yuan, respectively, corresponding to PE 16.22/ 12.77/11.15 times, maintaining a “buy” rating.
Risk warning: raw material price fluctuations exceed expectations; competition for rare earth permanent magnet materials intensifies; the company's sales strategy affects the company's product sales volume