Event: The company released its 2023 annual report and 2024 quarterly report. 1) In 2023, the company achieved revenue of 39.398 billion yuan, a year-on-year decrease of 18.30%; net profit to mother was 1,602 billion yuan, up 10.75% year on year, and net profit without return to mother was 1,400 billion yuan, an increase of 13.29% year on year. 2) 2023Q4 achieved revenue of 9.870 billion yuan, down 12.71% year on year and 8.60% month on month; net profit to mother was 441 million yuan, up 214.72% year on year and 19.13% month on month; net profit after deducting non-return to mother was 336 million yuan, up 364.18% year on year and 2.17% month on month. 3) 2024Q1 achieved revenue of 8.270 billion yuan, a year-on-year decrease of 3.41% and a decrease of 16.40%; net profit to mother of 427 million yuan, a year-on-year decrease of 2.95% and a decrease of 2.48% month-on-month; net profit after deducting non-return to mother of 301 million yuan, a year-on-year decrease of 23.27% and a decrease of 9.67% month-on-month.
Tungsten-molybdenum sector: Photovoltaic tungsten wire continues to be released, and rising tungsten prices increase mining side profits. 1) In 2023, the company's tungsten and molybdenum business achieved a total profit of 2,348 billion yuan, an increase of 61.82% over the previous year. It is estimated that the 23Q4 tungsten and molybdenum sector achieved a total profit of 678 million yuan, an increase of 137.06% year on year and 19.37% month on month. 2) Photovoltaic tungsten wire continues to be released. The sales volume of photovoltaic tungsten wire reached 76 billion meters in 2023 (16 billion meters for the whole year of 2022). The general trend is for photovoltaic tungsten wires to replace high-carbon steel wires. The subsidiary Xiamen Honglu achieved net profit of 830 million yuan, +166% year-on-year. 3) Strong tungsten prices. The price of tungsten concentrate was +5.11% year-on-year in 2023, increasing tungsten ore profits. Ninghua Xingluokeng, Duchang Jinding, and Luoyang Yulu achieved a total net profit of 507 million yuan, +8.01% over the same period last year.
Energy New Materials Sector: Profits declined sharply in 2023. 1) In 2023, the company's new energy materials business achieved a total profit of 559 million yuan, a year-on-year decrease of 54.98%. It is estimated that the 23Q4 new energy materials sector achieved a total profit of 111 million yuan, a year-on-year decrease of 55.24% and a month-on-month decrease of 36.21%. 2) In 2023, the company's lithium cobalate products achieved sales volume of 34,600 tons, a year-on-year increase of 4.19%; ternary material products were affected by a slowdown in downstream demand, with annual sales volume of 37,400 tons, a year-on-year decrease of 19.4%. Combined with a sharp drop in raw material and product prices, the overall profitability declined.
Rare earth sector: Magnetic material sales increased, sector profits declined. 1) In 2023, the company's rare earth business achieved a total profit of 144 million yuan, a year-on-year decrease of 54.57%. It is estimated that the 23Q4 rare earth business achieved a total profit of 33 million yuan, which changed from loss to profit over the previous month. 2) In 2023, the company's sales volume of magnetic materials increased 17.45% year on year, but due to falling product prices and increased market competition, profits in the rare earth sector declined. 3) Due to integration with China Rare Earth Group, Atomic Energy Company Longyan Rare Earth Company and Jinlong Rare Earth Smelting and Separation Business will no longer be included in the scope of the consolidated statement in 2024.
24Q1 photovoltaic tungsten wire continues to be released. 1) Photovoltaic tungsten wire continued to be released. In 24Q1, sales of fine tungsten wire (including photovoltaic tungsten wire) reached 34.1 billion meters, an increase of 141% over the previous year. The price of tungsten rose, and the 24Q1 tungsten concentrate price was +2.89% month-on-month and +4.85% year-on-year, increasing the company's tungsten ore product profits. 2) Profits in the new energy materials sector declined, and shipments of battery materials increased in 24Q1. Among them, ternary materials achieved sales volume of 15,900 tons, +249% over the same period last year. However, due to intense product competition, the total profit of new energy materials fell 5.31% year on year. 3) The rare earth sector dragged down year on year. Longyan Rare Earth Company and the former Jinlong rare earth smelting and separation business will no longer be included in the scope of the consolidated statement in 2024. Combined competition intensified, and profits from rare earth deep processing products declined.
Investment advice: The company's photovoltaic tungsten wire continues to be released, compounded by rising tungsten prices to increase mining side profits, and the company's tungsten and molybdenum sector is showing strong performance. We expect net profit to be 19.67/23.17/2.70 billion yuan in 2024-2026, respectively, corresponding to the current price. In 2024-2026, PE will be 14/12/10 times in sequence, maintaining the “recommended” rating.
Risk warning: The risk that economic fluctuations affect demand and prices, the risk of raw materials, the risk that the project does not meet expectations, etc.