Matters:
The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved operating income of 7.399 billion yuan, a year-on-year increase of 38.18%, net profit of 1,031 billion yuan, a year-on-year increase of 68.74%, net profit after deducting non-return to mother of 1,028 billion yuan, an increase of 67.45%; in the first quarter of 2024, the company achieved operating income of 1,973 billion yuan, an increase of 33.68%; net profit to mother of 274 million yuan. The year-on-year increase was 48.07%; net profit after deducting non-return to mother was 270 million yuan, an increase of 46.03%; the net cash flow from operating activities was 69 million yuan, up 123.38% year on year.
Commentary:
The performance was in line with expectations, mainly benefiting from the growth of the mining services business and continued strong sales of resource products. The company achieved net profit of 1,031 million yuan in '23, up 68.74% year on year, and net cash flow from operating activities of 1,085 billion yuan, up 13.38% year on year; in the first quarter of '24, the company achieved net profit of 274 million yuan, up 48.07% year on year, and net cash flow from operating activities of 69 million yuan, up 123.38% year on year.
The mining services business is progressing steadily, and the resource sector is creating a new growth pole. 1) Mining services sector: The company further developed the mining service market, and domestic and overseas mining service revenue further increased, achieving operating income of 6.61 billion yuan in 23, +25.52% year over year, and achieved operating income of 1.55 billion yuan in Q1 in '24, +7.3%; 2) Resource sector: the company produced 152,000 tons of copper concentrate in 23 (about 9,777.49 tons of copper contained in copper concentrate), with copper concentrate sales volume of 15,900 tons (with copper concentrate containing about 102,000 tons of copper), both with copper concentrate sales volume of 15,900 tons Dikulushi copper mine; cathode copper production is 4621.82 tons, all from Lonshi copper mine, not yet sold abroad; phosphate ore production is 165,000 tons, sales volume is 160,000 tons, all +100% year-on-year. Benefiting from a sharp increase in copper and phosphorus production and sales, the company achieved revenue of 626 million yuan in 23, accounting for 8.46%, of which copper concentrate sales revenue accounted for 6.84%, phosphate ore sales revenue accounted for 1.62%, and the Q1 resources sector achieved revenue of 390 million yuan in 2014.
The mining project is progressing steadily, and there is plenty of room for growth. 1) The Dikulushi copper mine continued to optimize the recovery process and completed the cementing, filling and transformation. The copper concentrate produced 9777 tons of copper and sold 102,000 tons in '23; 2) Lonshi copper mine officially entered the production stage at the end of the 3rd quarter of '23 and is expected to reach production by the end of 2024, with an annual output of about 40,000 tons of copper metal after delivery; 3) The San Matias copper, gold and silver deposit obtained research, and submitted an environmental impact assessment for the Alacran copper-gold-silver deposit to the Colombian National Environmental Licensing Authority (ANLA) in December 23 (EIA), mine control+estimated copper volume of 474,300 tons, gold content of 29 tons, and silver volume of 271 tons. The average annual ore extraction volume of the project is about 6.1 million tons/year, and the average copper cash cost is US$2.66 per pound; 4) It is proposed to acquire 80% of Lubambe copper shares and US$857 million claims (additional loan agreement) at a low price. Lubambe copper resource volume (proved+control+inference) is 86.6 million tons, copper grade 1.95%, acid dissolved copper 0.35%. Copper production 3.25 10,000 tons. The average cash cost during the production period is estimated to be 83.75 US dollars/ton, and the acquisition cost is extremely low. If the company can use its mining technology advantages and experience to turn losses into profits, it is expected to achieve greater value creation.
Investment suggestions: Considering the impact of rising copper and phosphorus prices and Lonshi copper mine's 24-year production capacity climb, we expect the company to achieve net profit of 17.51/25.53/3.153 billion yuan (the value was 18.83/2.188 billion yuan 24-25 years ago), with year-on-year increases of 69.8%, 45.8%, and 23.5%, respectively. We use segmental valuation, mining services business, and considering the company's average PE of 28 times in the past three years, we give 28 times PE; for the resource business, referring to the valuation situation of comparable companies, we will give 15 times PE, corresponding The target market capitalization for 2024 is 39.5 billion yuan, maintaining the “strong” rating.
Risk warning: the price of metal products fluctuates greatly; the expansion of project production falls short of expectations; project acquisition falls short of expectations.