Description of the event: The company released its 2023 annual report and 2024 quarterly report. The company released its 2024 quarterly report. In 2023, the company achieved revenue of 5.867 billion yuan, up 16.1% year on year; net profit to mother was 912 million yuan, up 36.9% year on year; net profit after deducting non-return to mother was 928 million yuan, up 38.2% year on year. With 2024Q1, the company achieved revenue of 1,611 billion yuan, a year-on-year increase of 41.4% and a decrease of 14.4%; net profit to mother of 240 million yuan, an increase of 27.9% year-on-year and a decrease of 2.3% month-on-month; net profit after deducting non-return to mother of 242 million yuan, an increase of 29.3% year-on-year and a decrease of 4.9% month-on-month.
Comment: Q1 iron ore shipments resumed, and gross margin increased year-on-year
① Volume: Shipments of 2024Q1 iron ore have resumed. In 2023, the company sold 6.7944 million tons of magnetite, down 10.89% year on year; sold 23,700 tons of metallic copper, up 6.02% year on year; sold 131,200 tons of vermiculite, down 13.95% year on year. With 2024Q1, the company achieved revenue of 1,623 billion yuan, a year-on-year increase of 69.6% and a month-on-month increase of 32.8%, which reflects the resumption of the company's iron ore shipments.
② Price: 2024Q1 The company's gross margin increased. In 2023, China's 62% iron ore index was 119.75 US dollars/ton, down 0.34% year on year; LME copper settlement price was 8477.47 US dollars/ton, down 3.63% year on year, and the company's gross margin was 63.02%, down 1.70 pct year on year; 2024Q1, the company's gross margin was 67.04%, down 1.57 pct month on month, up 17.52 pct year on year.
③ Financial expenses: In 2023, the company's financial expenses were -281 million yuan, a year-on-year decrease of 135 million yuan, mainly due to an increase in interest income. 2024Q1, the company's financial expenses were -65 million yuan, an increase of 0.18 million yuan over the previous year, mainly due to a decrease in exchange earnings, a decrease of 27 million yuan over the previous year.
Future core highlights: Iron ore's cost advantage is prominent, and copper phase II production capacity is gradually being released ① Copper Phase II construction continues to advance, and production capacity is expected to increase further. After the second phase of the copper project was put into operation, it was partially put into operation in the third quarter of 2023 and completed in December 2024. After production, it can produce 70,000 tons of metallic copper per year, and the copper mine production and operation period can continue for 15 years.
② The cost advantage of iron ore is prominent. The company's magnetite currently has about 140 million tons of magnetite stored on the ground, with an average grade of 58%. Meanwhile, underground production will add magnetite products every year. PC requires only simple magnetic separation of magnetite to raise the magnetite grade to 62.5% to 64.5%. Compared with domestic and foreign iron mines, the production cost of magnetite has a big advantage.
③ The vermiculite faucet is in a stable position. PC vermiculite ore is one of the top three vermiculite ores in the world. Vermiculite production accounts for about 1/3 of the global share. Due to the high grade and quality of PC vermiculite, PC has established a strong supply relationship with downstream vermiculite customers, and has been exporting and supplying vermiculite to European and Asian customers for a long time.
Profit forecast and investment advice: The company's iron powder sales are expected to gradually recover, and copper ore production capacity is gradually released. We expect the company's net profit to be 12.02/14.07/1,561 billion yuan in 2024-26. PE corresponding to the closing price on April 26 is 10x, 8x, and 8x, maintaining the “recommended” rating.
Risk warning: Prices of raw materials fluctuated greatly, downstream demand fell short of expectations, and production capacity release fell short of expectations.