Description of the event
In 2023, the company achieved operating income of 66.304 billion yuan, +5.19% year over year; achieved net profit of 3.351 billion yuan, -14.25% year over year; realized net profit without deduction to mother of 3,093 billion yuan, or -22.25% year on year. 2024Q1 achieved operating income of 14.963 billion yuan, -2% month-on-month; realized net profit of 522 million yuan, +54% month-on-month; and realized net profit of 568 million yuan without return to mother, +55% month-on-month.
Incident comments
Volume increased and price decreased, and the company's nickel products made steady profits. Huake's 45,000-ton project was completed at the end of Q1 in 2023. Huafei's 120,000-ton project was partially commissioned in June 2023, and production was achieved at the end of Q1 in 2024. In 2023, the company's nickel product production and sales volume was 128,300 tons and 126,400 tons, respectively, +83.33% and +87.78% compared with the same period last year. Nickel prices showed a downward trend in 2023. The average price of LME nickel was 21,688 US dollars/ton, -17% year over year, dragging down the profitability of the nickel sector. The company has responded positively to this: on the cost side, with the gradual decline in nickel ore prices, the completion of Huayue's 60,000-ton SCM slurry pipeline, and Huafei's successive production, the cost of the company's nickel products is expected to drop; on the price side, the company has successively invested in electric nickel production capacity to flexibly adjust the product structure. Currently, the production capacity of the company's LME and SHFE registered delivery products has reached 72,600 tons. Huayue, Huake, and Huafei achieved net profit of 930 million yuan, 730 million yuan, and 220 million yuan in 2023. The three companies calculated net profit to mother of 1.15 billion yuan based on equity ratios, -11% over the same period last year.
Meanwhile, in 2023, Xinyue Technology, IWIP, and Weston achieved investment income of 770 million yuan, 21.84 million yuan, and 30.73 million yuan respectively, of which Xinyue Technology +10% year-on-year. The company increased the deployment of nickel ore resources and completed minority equity transactions for two Indonesian mining projects, AJB and WKM, in March 2024, strengthening the reserves of nickel ore resources.
Shipments of lithium battery materials continue to grow. In 2023, the company achieved shipments of nearly 150,000 tons of lithium battery cathode precursors (including ternary precursors and cobalt tetroxide), with production and sales volumes of 123,600 tons and 1291,000 tons of ternary precursors, respectively, +21.30% and +30.64%; production and sales of cathode materials were 90,200 tons and 94,600 tons, respectively, -4.94% and +4.73%, of which 67,000 tons of high-nickel ternary cathode materials were shipped, accounting for about 83%, and lithium cobalt acid shipments were 13,000 tons, +32 tons.%.
Affected by the intensification of competition in lithium battery materials and the decline in lithium salt prices, the profitability of the company's lithium battery materials has declined. The company's gross profit per ton of ternary precursors and ternary cathodes in 2023 was 1.4 and 16,000 yuan/ton, respectively, with year-on-year declines. Chengdu Bamo achieved net profit of 530 million yuan for the year, -60% year over year. The joint venture Cathode Materials Leyou and Puhua contributed 416 million yuan and 29.03 million yuan in investment income respectively, or -49% and -35% over the same period last year.
The lithium project climbed rapidly and contributed positive gross profit in 2023. As Arcadia gradually climbed, lithium products contributed significantly to earnings in Q4. The company produced 11,500 tons of lithium products and sold 8,235 tons throughout the year, achieving an average sales price of 158,600 yuan/ton, sales cost 138,200 yuan/ton, and gross profit of 20,000 yuan/ton per ton. As the lithium project gradually climbs, the production cost of spodumene and the completion cost of lithium carbonate have been further reduced, and it is expected to contribute continuous positive benefits to the company under current lithium prices.
The decline in the proportion of copper-cobalt owned ores weighed on profits, and inventory depreciation dragged down the company's performance. In 2023, the company's sales volume of cobalt and copper products was 410,000 tons and 88,000 tons respectively, +12.2% and -2.06% year-on-year; gross profit of 365 million yuan and 1,399 million yuan was achieved, -84% and -12% year-on-year. The company's copper and cobalt profits declined due to a decrease in the proportion of its own mines and the continued slump in cobalt prices. At the same time, the company lost 371 million yuan in asset impairment and 42 million yuan in credit impairment throughout the year, dragging down the company's performance. With nickel prices falling and the new energy market sluggish, the company's Q4 operating performance declined month-on-month. Meanwhile, Q4 accrued asset impairment losses amounted to 333 million yuan, and Q4 profits declined month-on-month.
High dividends give back to shareholders, and cost reduction and efficiency continue to advance. The company continued to promote cost reduction and efficiency measures in 2023. The total amount of cash dividends and repurchases in 2023 was 2,326 billion yuan, with a dividend rate of 69.42%. The company continues to promote cost reduction and efficiency, and it is expected that the cost side will be further reflected in the future.
Earnings recovered significantly in the first quarter of 2024. 2024Q1 achieved gross profit of 1,810 billion yuan, +3.5% month-on-month. The sharp month-on-month recovery mainly comes from the sharp easing of asset depreciation pressure and the month-on-month recovery and improvement in operating performance: (1) 2024Q1 nickel prices rebounded, and the Huafei project gradually climbed downhill. At the same time, nickel project costs declined, and profits in the nickel sector were repaired; (2) the bottom of lithium prices rebounded steadily, and lithium profits may have recovered as lithium costs declined. At the same time, profits from cathode materials benefited from the stabilization or restoration of lithium prices; 2024Q1 was not dragged down by asset impairment losses; (3) as copper prices rose, copper business profits increased; (4) demand for lithium battery materials recovered as the three yuan downstream stocks began.
Risk warning
1. The price of metals fell sharply;
2. The commissioning of the company's project fell short of expectations.