The company published its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 61,264 billion yuan, +7.20% year on year, net profit to mother of 2,978 billion yuan, +57.11% year on year, net profit without return to mother of 2,987 billion yuan, +51.72% year on year. 2024Q1 achieved revenue of 13.164 billion yuan, -1.37% YoY, and realized net profit of 783 million yuan, +43.73% YoY and -13.56% YoY.
Production was stable in '23, inventories rose, and Q1 mineral gold production increased year-on-year. In 2023, the company's mine gold/mine copper production was 18.89 tons/80 million tons, a year-on-year change of -5.22%/+0.84%; sales volume was 18.27 tons/91,600 tons, a year-on-year change of -6.16%/+14.30%. By the end of the year, mine gold/mine copper inventories were 2.68 tons/3677.99 tons, a year-on-year change of +30.10%/-75.96%. Mineral gold production declined slightly in 23, and inventory increased significantly. 2024Q1 mine gold/mine copper production was 4.47 tons/18,700 tons, and sales volume was 4.15 tons/20,900 tons, respectively, a year-on-year change of +9.89%/+16.11%, and the Q1 mine gold inventory was 2.74 tons. According to the company's plan, in 2024, the company plans to produce 18.63 tons of mineral gold and 761,000 tons of mine copper. The production and operation plan is steady.
Higher prices have led to an increase in gross margin, and cost control has achieved remarkable results. The gross margin of the company's mining business in 2023 was 44.33%, +5.07pct year-on-year. In terms of price, the average price of domestic gold/copper/molybdenum concentrates changed +14.60%/+1.04%/+37.04% year-on-year in 2023, and the price increase led to an increase in profitability. In terms of expenses, the cost rate for the full year was 4.69%, or -0.60pct. Of these, sales/management/finance expenses were 0.83/16.76/429 million yuan respectively, a year-on-year change of -7.54/ -9.55%/-33.58%. Management expenses and financial expenses were drastically reduced. The company deepened reforms throughout the year, achieving a total cost reduction and efficiency increase of 163 million yuan.
Exploration and mergers and acquisitions go hand in hand to continuously strengthen the resource base. By the end of 2023, the company had resources amounting to 891.7 tons of gold, 2.162 million tons of copper, and 450,000 tons of molybdenum. In 2023, the company invested a total of 212 million yuan in geological prospecting, adding 30.66 tons of gold and 133,500 tons of copper, and increasing gold reserves by 372 tons through mergers and acquisitions of Laizhou CICC.
Key projects are progressing according to plan, and the volume of gold deposits in Shaling is driving high growth. By the end of 2023, the company had completed a total investment of 582 million yuan in key projects under construction, including the overall relocation and renovation project in Xindu, Liaoning; the first phase of the Inner Mongolia Deep Resources Mining Project has been completed and put into operation; Shandong Shaling Gold Mine has accelerated the construction of the project. Currently, on the underground side, four shafts have fallen to the bottom, and construction of mid-stage development, sliding systems, drainage systems, etc. is being carried out in an orderly manner. The average grade of the Shaling gold mine reached 2.77 g/t. It is one of the top ten gold mines in the country. According to the research report, it is expected to be completed in June 2025. The first phase of production is expected to reach 11 tons after commissioning, and the later annual output is about 6.6 tons. It is expected that the company's mineral gold production will be greatly increased in the future.
Profit forecast and investment advice: The company is vigorously promoting the “resource lifeline” strategy. The company is expected to significantly increase the company's gold production capacity after the merger and acquisition of the Shaling Gold Mine under Laizhou Zhongjin is put into operation. The company's performance is expected to fully benefit from the increase in profitability and production growth brought about by rising gold prices. The company's net profit for 2024-2026 is expected to be 40.79/45.37/5.270 billion yuan, respectively. The corresponding PE is 16/14/12X, maintaining the “recommended” rating.
Risk warning: Metal prices are falling, asset injections fall short of expectations, mining project progress falls short of expectations, etc.