Event: The company released its 2024 quarterly report. 2024Q1 achieved revenue of 122,517 billion yuan, a year-on-year decrease of 4.1%, a month-on-month increase of 0.1%, a year-on-month net profit of 1,715 billion yuan, a year-on-year decrease of 2.3%, an increase of 9.8% month-on-month, after deducting net profit of 1.806 billion yuan, an increase of 6.5% year-on-year and 46.5% month-on-month increase. The performance was in line with expectations...
2024Q1, the company's gross margin was 3.28%, up 0.34pct month-on-month, and 0.72pct year-on-year.
By commodity price, the average price of 2024Q1 and electrolytic copper was 69,400 yuan/ton, up 1.9% month-on-month and 1.2% year-on-year; the average price of gold in the previous period was 490.3 yuan/gram, up 3.9% month-on-month and 16.7% year-on-year. The average price of the TC spot index for copper concentrate was 25.47 US dollars/ton, a year-on-year decrease of 68%. However, due to the high proportion of long orders in large smelters and copper concentrate at the beginning of the year, the impact of falling smelting and processing costs on profits was limited; the average price of sulfuric acid in Hubei (without data from Jiangxi, replaced by Hubei) was 153 yuan/ton, down 16.6% from the previous year.
On a year-on-year basis, net profit to mother decreased by 40 million yuan year-on-year. The main profit reduction items were gross profit (+748 million yuan year over year, revenue and operating costs decreased year on year, or profit growth due to shrinking trade volume, while byproduct gold prices increased month-on-month or contributed to part of gross profit growth), investment income (+749 million yuan year over year, mainly due to hedging and closing losses decreased year on year), and the main profit reduction items were fair value changes (year-on-year increase of -862 million yuan, mainly due to loss of hedging and unclosed positions increased year on year), expense side (year-on-year increase in losses due to hedging and unclosed positions), and cost side (year-on-year increase in profit reduction of 374 million yuan year over year) Year-over-year increase in costs/R&D expenses $2.2/1.1 billion).
On a month-on-month basis, net profit to mother increased by 150 million yuan month-on-month. The main profit increases are gross profit (+423 million yuan month-on-month; the profit increase logic is similar to the year-on-year change), asset impairment losses (month-on-month increase of 560 million yuan, or due to 23Q4 inventory impairment and significant impairment of some old assets, while 24Q1 copper prices continued to rise, inventory impairment was less). Profit deductions are mainly on the expense side (profit reduction of 343 million yuan month-on-month, mainly due to financial expenses increasing by 547 million yuan, 23Q4 interest expenses being higher, and 24Q1 returning to normal), investment income (-333 million yuan month-on-month, mainly due to a month-on-month decrease in profit from hedging), other income (-123 million yuan month-on-month, or due to more government subsidies and tax rebates at the end of 23Q4, which returned to normal month-on-month decline in 24Q1).
Core highlights: The layout of the entire copper industry chain, leading domestic smelting and processing capacity. ① The company's business layout covers the entire industry chain of exploration, mining, beneficiation, smelting, processing, etc., and has integrated advantages. ② The company is the largest copper production base in China, with leading domestic smelting and processing capacity. The company produces more than 200,000 tons of copper in copper concentrate per year, and the company produces more than 1.8 million tons/year of cathode copper. Its Guixi smelter is the largest single copper smelter in the world. ③ State-owned enterprise reform, strict control of trade volume, and gradually turn losses into profits in the loss segment to generate profitable revenue and profit with cash flow.
Investment advice: The company has a scale advantage in the domestic copper industry. Considering the rise in copper prices, we raised our profit forecast. We expect the company's net profit to be 76.89/82.73/8.551 billion yuan for 2024-2026, respectively, and the PE corresponding to the April 26 stock price will be 12/11/11X, respectively, maintaining the “recommended” rating.
Risk warning: risk of copper price fluctuations, risk of TC/RC decline, risk of loss due to hedging errors.