Net profit to mother in '23 was +36.95% year-on-year. In '23, the “buy” rating company achieved revenue of 5.867 billion yuan (yoy +16.1%) and net profit of 912 million yuan (yoy +36.95%) in '23. We expect the company's EPS to be 1.83/2.08/2.44 yuan in 24-26 (the previous value was 1.83/235/100 million yuan). Comparable, the average PE (2024E) value of the company was 13.1X, giving the company a PE valuation of 13.1 times in 24 years, corresponding to a target price of 23.97 yuan (previous value of 20.79 yuan), maintaining a “buy” rating.
Magnetite sales in '23 were 6.794,400 tons, and 23H2 shipments clearly recovered. According to the company's annual report, magnetite production in '23 was 5.822 million tons (yoy -32.3%), with sales volume of 6.794 million tons (yoy -10.9%). Among them, 23H1 South Africa entered a state of national disaster twice due to floods and electricity shortages, which posed a major challenge to the company's shipments. 23H2 showed a marked recovery in shipments by formulating railway restoration measures and increasing automobile traffic volume. The gross profit per unit of magnetite in '23 was 510 yuan/ton (yoy+106 yuan/ton), and the gross profit margin was 82.35% (yoy-4.01pct). According to Wind, the average price of 62% iron ore from Platts in '23 was 119.75 US dollars/ton (yoy-0.4 US dollars/ton). By optimizing the product structure, the price difference between high and low grade was small, and sales of low-grade ore increased, and profits grew steadily.
The second phase of copper has entered partial production, and is expected to further increase its performance in 23 years, the company's copper product sales volume is 23,800 tons (yoy +6.0%), and the gross profit margin is -5.68% (yoy-7.76pct).
In 2023, the company's Copper Phase II No. 5 crusher has been put into use, and the commissioning has basically been completed. In 2024, equipment installation and commissioning, personnel training, and the orderly connection between Phase I and Phase II will be further promoted to continuously increase the volume of copper phase II mining. The company aims to produce and sell 30,000 tons of metallic copper by 2024.
The second phase is expected to produce 70,000 tons of metallic copper per year after delivery. At the same time, the average grade of the second phase is about 0.8%, higher than 0.68% in the first phase. It is expected to continue to improve the company's profitability and inject new momentum into performance growth.
Net sales margin for 23 years was +2.49pct year-on-year, and the cash dividend rate was 42.92%, and the cost ratio for the 23-year company period was 31.37% (yoy-7.98pct), of which the sales expense ratio was 26.51% (yoy-6.27pct). Net profit margin on sales 21.63% (yoy+2.49pct). Meanwhile, the company plans to pay a dividend of 0.6 yuan per share in '23, with a cash dividend ratio of 42.92%, which is a further increase from 29.39% in '22.
Furthermore, in 24Q1, the company's gross sales margin was 67.04% (yoy+7.51pct, qoq-1.57pct) and net sales profit margin 22.04% (yoy-1.36pct, qoq+4.20pct).
Risk warning: Freight prices fluctuate greatly, and downstream demand falls short of expectations.