Key points of investment
Event: The company released its 2024 quarterly report. The company achieved revenue of 74.8 billion yuan in a single quarter of 2024Q1, -0.22% year-on-year, and +9.33% month-on-month; realized net profit to mother of 6.26 billion yuan, +15.05% year-on-year, and +26.37% month-on-month, and net profit to mother increased year-on-month in a single quarter. 2024Q1 has further implemented the general policy of improving quality control costs and efficiency. The operating costs of overseas projects dropped significantly from month to month. The unit sales costs of mineral gold concentrate and copper concentrate fell by 14% and 13%, respectively. Combined with the background of the continuous rise in gold and copper prices, the company's gross profit level increased significantly.
2024Q1 gold and copper production increased year-on-year. Thanks to rising prices, effective cost control, the gross margin of mining companies increased dramatically. In terms of production, from January to January 2024, the company's mineral gold production was 16.8 tons, up 5% year on year, down 5% month on month; mineral copper production was 263,000 tons, up 5% year on year, up 4% month on month; mineral zinc production was 98,000 tons, down 9% year on year, down 0.2% month on month; mining companies' gross margin was 54.50%, up 0.97 percentage points year on year, up 8.88 percentage points month on month. In terms of price, the price of gold reached another record high; the price of copper showed strong performance due to continued strong demand for new energy sources and frequent supply disturbances; the price of zinc was dragged down by the decline in traditional demand such as real estate in China, and the price fell significantly. The average spot price of 2024Q1 domestic gold was 489.18 yuan/gram, +16.3%. The unit sales costs of the company's gold ingots and gold concentrate were 276.72 yuan/gram and 145.17 yuan/gram, respectively, +8.05% and -5.58%, respectively. The gross margins were 41.47% and 66.75%, respectively, up 3.53 and 8.70 percentage points year-on-year from 2023Q1. The average spot price of copper was 69,432 yuan/ton, +1.5% year on year. The unit sales costs for the company's copper concentrate and copper deposits were 18,546 yuan/ton and 32,155 yuan/ton, -7.93% and -8.41%, respectively. The gross margins were 63.77% and 44.77%, respectively, with year-on-year growth. The average spot price of zinc was 21033 yuan/ton, -9.8% year on year. The unit sales cost of the company's mineral zinc was 8,689 yuan/ton, -3.74% year-on-year, with a gross profit margin of 28.89%. Under downward price pressure, gross margin decreased 3.32 percentage points year on year.
The flagship mine is gaining momentum. On the copper side, Camoa Copper Mine and Julong Copper Mine both saw significant growth. The Kamoa copper mine has resources of about 42.66 million tons, with 394,000 tons of copper mining in 2023, and 507,000 tons of copper planned; the first and second phases of the project will be completed and put into operation in the first quarter of 2023, with an annual production capacity of 450,000 tons; the third phase of the mining project is expected to be completed and put into operation in the second quarter of 2024, with a total annual ore processing capacity of 14.2 million tons. At that time, production capacity will increase to more than 600,000 tons of copper. Julong Copper has resources of 19.27 million tons of copper, 10,600 tons of silver, and 1.2 million tons of molybdenum; 154,400 tons of copper ore in 2023 and 166,000 tons of copper in 2024; construction of the second phase of the renovation and expansion will be fully started in 2024. It is planned to be completed and put into operation by the end of 2025, and the annual mineral copper production will reach 30-350,000 tons after production. In terms of gold, the Bogra Gold Mine and the Offshore Gold Mine are the main incremental projects. The Pogra gold mine is one of the top ten gold mines in the world and the second largest gold mine in PNG. It has resources of 417 tons of gold. Production was fully resumed on December 22, 2023. After the resumption of production, the company's equity was about 5 tons of mineral gold per year. The offshore gold mine is the largest single gold mine in China. It has 562 tons of gold resources. It is planned to be put into operation in 2025. The overall production will reach about 15-20 tons of mineral gold per year after production, and is expected to be promoted to one of the largest gold mines in China.
Profit forecast. We refer to the company's production plan target and the progress of the new mine commissioning. We expect the production of mineral gold in 2024-2026 to be 74/90/99 tons, and the production of mineral copper will be 111/117 /1.34 million tons, respectively. We expect the company's net profit to be RMB 260, 32.6, and 35.6 billion yuan respectively, with year-on-year growth rates of 23.2%, 25.4%, and 9.2%. By the close of April 22, 2024, the corresponding PE for 2024-2026 would be 18.01x/14.36x/13.15x, respectively, maintaining a “buy” rating.
Risk warning: Prices of metals such as gold, copper, lead, zinc, and lithium have dropped sharply; production falls short of expectations due to renovation and expansion projects falling short of expectations; risk of exchange rate fluctuations.