Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 186.269 billion yuan, up 7.68% year on year; realized net profit of about RMB 8.250 billion, up 35.98% year on year; realized net profit withheld from mother of 6.233 billion yuan, up 2.73% year on year; operating cash flow was 15.5 billion yuan, up 1% year on year; and dividend of 1.5425 yuan per 10 shares.

Key points of investment:

The company's operating performance in 2023 reached a record high. The company's “mining+trade” two-wheel drive development covers the five stages of “exploration - mining - selection - smelting - trade”, and its main business is distributed in Asia, Africa, South America, Oceania and Europe. In 2023, the company will focus on transforming resource advantages into production capacity advantages, give full play to the synergy between mining and trade sectors, pursue profitable income and profit with cash flow, and enter the “fast track” of long-term healthy development. By product, in 2023, the company's molybdenum/tungsten/copper (excluding NPM) /cobalt/niob/phosphorus/copper-gold (NPM) /mineral metal trade/refined metal trade revenue was 71.31/14.80/245.95/34.06/26.28/36.96/15.82/442.79/1237.99 billion yuan respectively, up 28.14%/5.70%/308.41%/-8.59%/2.61%/-23.11%/22.37%/10.93%/3.91%; The gross margin was 40.24%/59.54%/45.30%/37.01%/34.00%/17.56%/21.24%/1.65%/1.07%, up 3.08%/-3.07%/20.20%/-44.92%/-6.49%/-19.16%/1.92%/-2.25%/1.12%, respectively, from the previous period. By the end of 2023, the company had 3463.82/524.64/136.25/10.97/203.6/82.263 million tons of copper metal (TFM+KFM) /cobalt metal (TFM+KFM) /molybdenum metal/tungsten metal/niobium metal/phosphorus resources, as well as 30% equity and lithium resource layout for the Huayue Nickel-Cobalt Project.

The company achieved year-on-year growth in all product production in 2023, copper, cobalt, niobium and phosphorus production reached record highs, and achieved a complete layout of copper-cobalt-nickel-lithium new energy metals. In 2023, the company produced 419,500 tons of copper and 55,500 tons of cobalt, up 51% and 174%, respectively. The company's copper production was close to the top ten in the world, making it the world's largest producer of cobalt, and maintaining the world's leading production of molybdenum, tungsten and niobium. The company successfully completed two world-class copper-cobalt projects, further consolidating its production capacity advantage. The KFM project produced benefits ahead of schedule in the first quarter of 2023. It was put into operation in the second quarter, producing 113,700 tons of copper and 33,900 tons of cobalt throughout the year. According to the “milestone” point, the TFM mixed ore project successfully completed the construction of three production lines: the Central District Hybrid Mine, the Eastern District Oxide Ore and the Mixed Mine. Currently, it has 5 copper-cobalt production lines, with an annual production capacity of 450,000 tons of copper and 37,000 tons of cobalt. Annual production of 28,000 tons of copper and 21,600 tons of cobalt.

In 2023, the company sold 80% interest in the NPM copper and gold mine and received huge profits. The company and the Ningde Era consortium obtained mining rights for two lithium salt lakes in Bolivia. As a result, a complete layout of new energy metals copper-cobalt-nickel-lithium was achieved.

The company properly resolves TFM equity matters and lays a solid foundation for long-term development. In April 2023, the company and partners reached a consensus on the TFM equity issue; in July, the “Settlement Agreement” was signed to properly resolve the TFM equity issue, which verified the ability to deal with complex issues in international operations and laid a solid foundation for long-term development.

The company announced the 2024 production volume and physical trade volume guidelines for major products. The company is expected to accelerate the transformation of resource advantages into production capacity advantages and greatly increase profitability. The company's main product output guidelines in 2024 are 520,000-5,70000 tons of copper metal; 60,000-70,000 tons of cobalt metal; 12000-15,000 tons of molybdenum metal; 6500-7500 tons of tungsten metal; 9,000-10,000 tons of niobium metal; and 105-1.25 million tons of phosphate fertilizer. The physical trade volume guideline is 5 to 6 million tons. Copper-cobalt sector: TFM made every effort to push for the end of the East Region, reaching production in the first quarter and meeting the standards in the second quarter. TFM and KFM completed LME copper trademark registration, achieving annual copper production of more than 520,000 tons and cobalt production of more than 60,000 tons; planning to expand production capacity in Africa and launch TFM Phase III and KFM Phase II expansion projects in due course; Molybdenum and tungsten sector: Accelerate collaborative mining and expansion in ****gou, and promote the construction of Lishuwa, Hongyao Shigou, and Xiaoshi slag discharge sites as a whole; Further increase in niobium recovery rate, iron niobium production strives to break through 1 10,000 tons mark; launch a comprehensive recycling project for phosphorous sector magnetite. The company is expected to increase and speed up resource allocation and focus on cultivating new profit growth points. Relying on its existing layout in Africa, South America and Southeast Asia, the company focuses on new energy metals and other superior metals, focusing on the types of resources related to the new energy industry and scarce domestic resources, actively reserving high-quality projects, implementing countercyclical mergers and acquisitions in due course; deepening cooperation with the Ningde Era to accelerate the African battery value chain project and the Bolivia lithium lake industry chain project.

Maintain the company's “gain” investment rating. The company's fully diluted EPS in 2024/2025/2026 is estimated to be 0.48 yuan/0.52 yuan/0.56 yuan respectively. Based on the closing price of 9.47 yuan on April 18, the corresponding PE is 19.85X/18.37X/16.98X, respectively. Currently, global copper stocks are low. In the medium to long term, declining mine grade, rising mining costs, and energy transformation will reshape the copper supply and demand structure. The copper price center will continue to rise, and new energy has become an important demand engine for copper; the company's production and operation have maintained steady growth in recent years, project construction has improved, and development momentum has continued to increase. Demand in the new energy industry chain is growing rapidly in terms of downstream demand. As the domestic economy recovers, demand for metals such as copper, tungsten, cobalt, niobium, and molybdenum is expected to gradually recover; it is expected that the company's revenue and profit will continue to grow; at present, the company's revenue and profit valuation level is expected to continue to grow. The outlook and the company's position in the industry maintain the company's “gain” investment rating.

Risk warning: (1) The Fed's interest rate hike exceeded expectations; (2) the international macroeconomic downturn; (3) the geopolitical conflict intensified; (4) changes in industry policies; (5) the price of copper, tungsten, cobalt, niobium, and molybdenum fluctuated greatly; (6) downstream demand fell short of expectations; (7) the company's production capacity supply fell short of expectations.