Event: On April 29, 2024, the company released its 2024 quarterly report. With 2024Q1, the company achieved revenue of 46.12 billion yuan, a year-on-year increase of 4.2% and a decrease of 15.5%; net profit to mother of 2.07 billion yuan, an increase of 553% year-on-year and a decrease of 64.3% month-on-month; net profit after deducting non-return to mother of 2.09 billion yuan, an increase of 3083% year-on-year and a decrease of 57.1% month-on-month. The results were in line with our expectations.
On a year-on-year basis, net profit from 2024Q1 increased by 1.75 billion yuan year-on-year, mainly due to a year-on-year increase of 4.1 billion yuan in gross profit. ① Production: Copper and cobalt production increased more than expected. In 24Q1, copper and cobalt production increased 123% and 392%, respectively, to 14.7 and 25,000 tons, respectively. ② Sales volume: The actual sales volume of copper was 126,000 tons. Compared with mine-side sales, it was converted into in-transit inventory, which in turn generated additional taxes (income tax+resource tax of 2-3 billion yuan). The actual sales volume of cobalt was 24,000 tons, which is not much different from mine-side sales. In the same period last year, due to the equity incident, copper and cobalt products were not sold in 23Q1, so the profit of the copper and cobalt sector increased sharply over the same period last year.
On a month-on-month basis, net profit from 2024Q1 decreased by 3.73 billion yuan month-on-month. The main profit reduction items were gross profit (-2.96 billion yuan month-on-month, mainly due to a sharp decline in copper sales) and net investment income (-21.9 billion yuan month-on-month, mainly due to the sale of NPM copper and gold mines, which led to a high base in 2023Q4). ① Price: The price of 2024Q1 copper and cobalt was 8438 US dollars/ton and 13.5 US dollars/pound, respectively, with year-on-month changes of +3.4% and -10.7%, respectively, and a year-on-year decrease of 5.5% and 20.5%, respectively. ② Sales volume: Molybdenum and tungsten sales decreased by 14.3% and 18.7%, respectively, mainly due to the decline in mine grade in the molybdenum and tungsten sector, and the decline in production led to a decline in sales. Niobium and phosphorus sales changed by +3.4% and -12.7%, respectively. Actual copper sales declined sharply from about 200,000 tons in Q4 to 126,000 tons month-on-month, mainly due to the sale of some inventory in Q4, phased blocking of shipping in Q1, and an increase in in-transit inventory. ③ Profit:
The gross profit per unit of copper, cobalt, molybdenum and tungsten was 2.68/3.1/10.94/1281 thousand yuan/ton, respectively, and the gross profit per unit of niobium and phosphorus was 106,700 yuan/ton and 462 yuan/ton, respectively. Among them, it is worth noting that copper and cobalt sector companies disclose revenue and operating cost data as mine-side data, so they need to be divided by mine-side sales rather than actual sales disclosed by the company.
Core highlights: ① 2024 production guidelines: 52-570,000 tons of copper metal (considering the successful construction of the TFM hybrid mine, all three production lines were fully produced in March 2024. Currently, the copper-cobalt production capacity has reached 450,000 tons and 37,000 tons/year respectively. Q1 copper production has reached close to 150,000 tons. We expect annual copper production to reach the upper limit of the guideline), 60-70,000 tons of cobalt metal, 12-15,000 tons of molybdenum metal, 0.5-0.75 million tons of tungsten metal, 90,000 to 10,000 tons of niobium metal, and 10.5-1.25 million tons of phosphorus fertilizer Tons, the physical trade volume is 5 to 6 million tons. One of the key tasks in 2024 is planning to expand production capacity in Africa and launch TFM Phase III and KFM Phase II expansion projects in due course. ② Development goals for the next five years: Complete the goal of “moving to the next level” in the second step of the “three-step” strategy and initially enter the ranks of world-class mining companies: achieve annual production of 80-1 million tons of copper metal, 90,000 to 100,000 tons of cobalt metal, 25-30,000 tons of molybdenum metal, and more than 10,000 tons of niobium metal.
Investment advice: Considering the rise in copper prices, we raised our performance forecast. We expect the company's net profit to be 122, 129, and 14.6 billion yuan in 2024-2026, EPS 0.56, 0.60, and 0.68 yuan respectively, and PE corresponding to the latest stock price (April 30) is 16X/15X/13X, respectively, maintaining the “recommended” rating.
Risk warning: Project progress falls short of expectations, falling copper and cobalt prices, geopolitical risks, exchange rate risks, etc.