Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 75.589 billion yuan, a year-on-year increase of 2.33%, and net profit to mother of 1,118 billion yuan, a year-on-year decrease of 7.46%.
Looking at a single quarter, 2023Q4 achieved revenue of 6.280 billion yuan, a year-on-year decrease of 62.1%, a year-on-month decrease of 75.6%, and net profit to mother of 148 million yuan, a year-on-year decrease of 46.1% and a decrease of 41.4% month-on-month. In 2024Q1, the company achieved revenue of 21,852 billion yuan, a year-on-year increase of 12.2%, a year-on-month increase of 248.0%, and net profit to mother of 315 million yuan, a year-on-year decrease of 5.5% and a year-on-month increase of 112.7%. The results were slightly lower than market expectations.
The company's product production and sales volume remained high in 2023, and profits remained steady under the pressure of copper foil processing fees.
In 2023, due to changes in production and sales of various products, the company's copper tube and copper bar revenue growth slowed, and copper bar revenue grew negatively. In 2023, the company achieved revenue of 41.2 billion yuan, accounting for 54.4% of total revenue, an increase of 0.58%; copper rod products achieved revenue of 4.8 billion yuan, accounting for 6.4% of total revenue, a year-on-year decrease of 19.42%; copper products achieved revenue of 1.96 billion yuan, accounting for 2.6% of total revenue, up 2.97% year on year; and revenue from copper foil products, accounting for 1.0% of total revenue, up 893.50% year on year. In terms of gross profit share, the copper tube sector still accounts for the highest gross profit share, reaching 80.4%, and the gross profit ratio of copper bars/copper bars/copper foils was 8.6%/1.2%/-5.7%, respectively.
Looking at 2024Q1 month-on-month, the company's net profit to mother increased by 167 million yuan month-on-month. Mainly due to a month-on-month increase in gross profit of 401 million yuan, mainly due to improved demand for air conditioning in Q1, the company's product production and sales increased. Combined, Q4 copper foil product losses were more serious, resulting in a low base. Fair value changes increased profit of 79 million yuan month-on-month. The month-on-month profit reduction was mainly a month-on-month reduction in expenses and taxes. Mainly due to the increase in management expenses and financial expenses of 170 million yuan and 260 million yuan, respectively. The increase in management expenses was either due to the low Q4 base and the return to normal in Q1. The month-on-month increase in financial expenses was mainly due to higher interest rates on overseas loans and higher balance ratio (61.22% at the end of the 2024Q1 period, 2.89pct month-on-month increase), which led to an increase in interest expenses.
Core highlights: ① Production line transformation continues, and copper pipe production capacity continues to expand. The company will use the fifth-generation continuous casting and rolling process to phase out, transform and upgrade old production lines in batches by the end of 2024. The company's precision copper tube production capacity is expected to increase to 1.31 million tons in 2024, with great potential for growth. ② The implementation and commissioning progress of the copper foil project exceeded expectations. At present, the first phase of production capacity at the Gansu plant has been put into operation. At the same time, the company also set up an Indonesian subsidiary to invest in the construction of 100,000 tons of lithium battery copper foil production capacity in Indonesia and layout overseas markets. Due to low capacity utilization, high supply in the superposition industry and low processing costs, the copper foil sector is still in a state of loss. It is expected that the copper foil sector will turn a loss into a profit.
Investment advice: As the competitive pattern improves, product processing costs pick up, the company's profit per ton of products may still have room to rise. Combined production capacity continues to expand, and the volume and price of the company's products have risen sharply. At the same time, the company entered the copper foil circuit and is expected to gradually achieve profit as the utilization rate of copper foil production capacity increases. We expect that in 2024-2026, the company will achieve net profit of 13.40, 15.66, and 1,819 billion yuan, EPS of 0.67, 0.78, and 0.91 yuan, respectively. The PE corresponding to the closing price on April 30 is 14x, 12x, and 10x, maintaining the “recommended” rating.
Risk warning: Project progress falls short of expectations, risk of exchange rate fluctuations, downstream demand falls short of expectations, etc.