Event: The company released its 2024 quarterly report. The company achieved revenue of 74.777 billion yuan in 2024Q1, a year-on-year decrease of 0.2% and a month-on-month increase of 9.3%; net profit to mother was 6.261 billion yuan, up 15.1% year-on-year and 26.4% month-on-month. The results exceeded our expectations.
On a year-on-year basis, net profit to mother increased by 820 million yuan, mainly due to a year-on-year increase of 780 million yuan in gross profit (a sharp rise in the volume and price of copper and gold) and a year-on-year increase of 260 million yuan in net investment income. ① Volume: Mineral gold/mineral copper/mineral zinc production changed by +5%/-9% year-on-year to 16.8 tons/263,000 tons/98,000 tons, respectively. The decline in mineral zinc was mainly due to low zinc prices, and production enthusiasm weakened, and remained basically flat from month to month. ② Price: The price of mineral gold/mineral copper/mineral zinc changed by +18.2%/+1.3%/-8.2%, respectively. ③ Cost: The unit sales cost of mineral gold/mineral copper/mineral zinc increased by +11.5%/+3.6%/-3.7%, respectively. Among them, the increase in mineral gold costs was mainly related to changes in product structure. The proportion of relatively high-cost gold ingots increased from 45% last year to 59%. Looking at the cost of gold concentrate alone, the cost of gold concentrate decreased 5.6% year on year. The increase in mineral copper costs is also related to the increase in the share of electrolytic copper. The Boer smelter was put into operation in mid-2023, so the 24Q1 electrolyzed copper sales volume was 29,000 tons (0 for the same period in '23). The cost of electrolytic copper was high, increasing overall costs. Copper concentrate/electrodeposited copper costs decreased by 7.9% and 8.4% year on year.
On a month-on-month basis, net profit attributable to mother increased by 1.31 billion yuan month-on-month, mainly due to a month-on-month increase in fees and taxes of 8.4 billion yuan, gross profit of 140 million yuan month-on-month, and an increase of 590 million yuan in asset/credit impairment losses.
① Expenses and taxes: Expenses and taxes both declined month-on-month. The main reduction was the month-on-month reduction in management fees/financial expenses of 3.3/210 million yuan, mainly due to the higher management cost base due to the payment of bonuses at the end of 23Q4. Q1 paid off part of the interest-bearing debt, and the balance ratio dropped from 59.66% at the end of '23 to 58.30% at the end of 24Q1. ② Gross profit: The month-on-month profit increase was mainly due to price increases and costs reduced. On the price side, mineral gold/mineral copper/mineral zinc prices changed +12.8%/+3.9%/+3.1% month-on-month; on the production side, mineral gold/mineral copper/mineral zinc production changed by -5%/+4%/-0.2%% month-on-month, respectively, to 16.8 tons/263,000 tons/98,000 tons. The reduction in mineral gold may be mainly affected by safety and environmental protection incidents in Shanxi Province; on the cost side, the sales cost of gold ingots/gold concentrate for mineral gold decreased by 6% and 14%, respectively, and copper concentrate copper concentrate from the mine copper Sales costs of copper/electrolytic copper changed -13% month-on-month, respectively /+ 22%/-19%, the month-on-month increase in the cost of copper deposits, or the sales cost of mineral zinc decreased by 12% month-on-month, mainly due to the continuous increase in electricity costs of Congolese gold.
Core highlights: The three major copper mining clusters continue to blossom, and the lithium and molybdenum strategic metal sector is creating a new growth curve.
The copper sector, Timok+Bor, Kamoa, and Julong, all three world-class copper mining clusters will continue to contribute to growth in 2024-2026; in the gold sector, multiple projects go hand in hand, and marine gold mines, Rosebel, and Sabayalton form a new increase, and gold production continues to grow. The strategic metals sector grabs the high-quality lithium resources of the “Two Lakes and Two Mines” and expects resource advantages to be transformed into production advantages. At the same time, the strategic mineral molybdenum was added.
Investment advice: The company's copper and gold production continues to grow. Considering the rise in copper and gold prices, we expect the company to achieve net profit of 28 billion yuan, 33.9 billion yuan, and 36.6 billion yuan in 2024-2026. The PE corresponding to the closing price on April 22 is 17x, 14x, and 13x, maintaining the “recommended rating”.
Risk warning: Project progress falls short of expectations, falling prices of metals such as copper, gold, lithium, etc., geopolitical risks, exchange rate risks, etc.