Incident: The company disclosed its 2024 quarterly report. 2024Q1 achieved operating income of 46.121 billion yuan, a year-on-year increase of 4.2%; achieved net profit attributable to mother of 2,072 billion yuan, a sharp increase of 553.3%; realized net profit without return to mother of 2,091 billion yuan, a significant increase of 3082.9%; and achieved basic earnings per share of 0.10 yuan/share, a sharp increase of 566.7% year on year. 2024Q1 accompanied the TFM mixed mining project, and the company's production and sales of copper and cobalt products increased significantly year on year; compounded by the strengthening of the fundamentals of procyclical copper products, the copper price center moved steadily upward, and the “volume and price increase” logic was gradually realized; and the company's profit increased by leaps and bounds year-on-year.
The core mine TFM+KFM both reached production, and copper and cobalt production capacity entered a centralized release period. The construction of the TFM hybrid mine went smoothly in the first quarter of 2024. The three production lines (Central District Hybrid Mine, Eastern District Oxide Ore and Hybrid Mine) were fully produced in March 2024. Up to now, they have formed an annual production capacity of 450,000 tons of copper and 37,000 tons of cobalt. In terms of production, 2024Q1's copper production is about 147,000 tons, or +122.9%, which has completed 27% of the annual production guidelines; cobalt production is 25,200 tons, +392.2% over the same period last year, and has completed 39% of the annual production guideline. Overall, the company's core mines have all completed production and entered a period of concentrated production capacity release. Based on the calculation of KFM copper and cobalt production in 2023 and TFM mine production output, it is expected to produce about 560,000 tons of copper and 71,000 tons of cobalt for the whole year, making it steadily a world-class mining enterprise.
The “mine+trade” business model superimposes Gao Bingfu mines, highlighting the company's high-quality “resource attributes”. Through a modern mining model combining “mining+trade”, the company reduces costs through resource integration and gradually expands its layout in the field of global resources; at the same time, it enhances the company's position and influence in the field of global mineral resources and enhances the company's pricing power for key mineral products. In terms of mine resource allocation, as of 2023, the company's copper resources reached 34.64 million tons, cobalt metal resources reached 5.25 million tons, and molybdenum metal resources reached 1.36 million tons. Both resource endowments and resource volume are at the leading international level, strengthening the company's high-quality “resource attributes”. Along with the scarcity of copper and cobalt resources, the company is expected to usher in a value revaluation.
Mine-side supply and smelting capacity growth are “double decelerating”; procyclical copper price performance is expected to further consolidate the company's profitability. Looking at supply and demand, the slowdown in supply-side growth strengthens the fundamentals of copper prices. A mismatch between copper ore output and the growth rate of electrolytic copper production may accelerate the advent of copper ore shortages, and insufficient raw materials on the mine side may force the growth rate of electrolytic copper output to decline in 2024; on the demand side, driven by consumption scenarios such as power infrastructure and the popularity of new energy charging piles in China, copper metal consumption may remain high, further strengthening the contradiction between copper supply and demand. Combined with the Federal Reserve's easing expectations and repricing, the monetary policy shift can be expected to be implemented. We are optimistic about the procyclical copper price performance. It is expected that the company will fully benefit from the upward flexibility of copper prices and the high business concentration in the copper and cobalt sector to further consolidate profitability.
Investment advice: Continued expansion of core mine production capacity, optimistic about the company's “sharp rise in volume and price” logic under copper price flexibility.
The estimated 24-26 revenue is 1975.0/2072.9/216.94 billion yuan, and net profit to mother is 100.1/110.0/12.19 billion yuan, corresponding to PE 19.4/17.6/15.9 times, maintaining the “buy” rating.
Risk warning: Downstream copper demand falls short of expectations, risk of the Federal Reserve exceeding expectations and tightening, etc.