Event: The company released its 2024 quarterly report. 2024Q1 achieved revenue of 31.54 billion yuan, a year-on-year increase of 4.9%, a year-on-month decrease of 13.4%, a year-on-month net profit of 451 million yuan, a year-on-year decrease of 5.6%, an increase of 637.9% month-on-month, after deducting net profit of 455 million yuan, an increase of 1.0% year-on-year and 562.8% month-on-month.

The performance was in line with expectations.

2024Q1, the company's gross margin was 3.87%, down 0.77pct month-on-month and 0.19pct year-on-year.

By commodity price, 2024Q1, the average price of electrolytic copper was 69,400 yuan/ton, up 1.9% from month to month, up 1.2% year on year; the average price of the TC spot index for copper concentrate was 25.47 US dollars/ton, down 68% year on month, but due to the high proportion of large smelters and the ability to produce copper concentrate with long order prices at the beginning of the year, the impact of falling smelting and processing costs was limited; the average price of sulfuric acid in Guangxi (no data from Yunnan, replaced by Guangxi) was 362 yuan/ton, down 7.6% year on year. An increase of 8.2%.

On a year-on-year basis, net profit to mother decreased by 0.27 billion yuan year-on-year. The main profit reduction items are minority shareholders' profit and loss (-54 million yuan, mainly the year-on-year increase in net profit of non-wholly-owned subsidiaries in the current period), fair value changes (-0.28 billion yuan, mainly a year-on-year decrease in fair value changes in CCC Lingnan), impairment losses, etc. (year-on-year -0.28 million yuan, mainly to prepare for an increase in accrued inventory price declines), mainly due to the value-added tax input tax plus deduction policy, which can also be accompanied by a 30% year-on-year increase in other income. Certificate, or the price of sulfuric acid (Due to the year-on-year increase); gross profit was basically the same (+0.02 billion yuan year over year).

On a month-on-month basis, net profit to mother increased by 390 million yuan month-on-month. It was mainly due to a month-on-month decrease in asset impairment losses of 690 million yuan. This was due to the large amount of impairment due to the relocation of the Southwest Copper Industry in 23Q4 and the return to normal in 24Q1. Profit reduction was mainly due to a decrease of 480 million yuan in gross profit, or mainly due to TC spot losses and a slight month-on-month decline in sulfuric acid prices. In addition, Q1 revenue fell 13.4% month-on-month, or reflected a decrease in refined copper production due to the relocation of the southwest copper industry.

Core highlights: 1) Increased shareholding in Diqing Nonferrous Metals, further increasing the amount of resources held by copper. In 2022, the company acquired additional shares in Diqing Nonferrous Metals, and the share ratio increased from 50.01% to 88.24%. 2) The relocation project optimizes the smelting layout. The investment scale of the Southwest Copper Branch's relocation project is about 640 billion yuan. After completion, the project will have an annual production capacity of 550,000 tons of cathode copper, 1.35 million tons of sulfuric acid, 11 tons of gold, and 650 tons of silver. 3) Backed by China Alcoa Group, the majority shareholder, resource integration can be expected in the future. The majority shareholder owns part of Liangshan Mining's shares, Peru's Toromocho copper project, and Tibet's Tegelonan deposit prospecting rights, and future asset injections can be expected.

Investment advice: The company is the only listed company in the copper industry under China Alcoa Group and China Copper. Mine side asset injection can be expected. Considering the rise in copper prices, we raised our profit forecast. We expect the company's net profit to be 22.56 billion yuan, 24.84 billion yuan, and 2,650 billion yuan respectively in 2024-2026, and PE corresponding to the April 26 stock price is 13/11/11X, respectively, maintaining the “recommended” rating.

Risk warning: Copper price fluctuation risk, TC/RC falls short of expectations, asset injection progress falls short of expectations.