Incident: The company released its 2023 annual report, achieving annual revenue of 9.32 billion yuan, -12.7% YoY; net profit to mother of 619 million yuan, +11.6% YoY. 2024Q1 achieved operating income of 5.51 billion yuan, +112.8% year-on-year, and +135.0% month-on-month; net profit to mother of 236 million yuan, +23.0% year-on-year and +137.5% month-on-month.
The performance of self-produced copper mines was stable, and the start of production of Houma Beicong led to a high year-on-month increase in 24Q1 performance. 1) In terms of price, copper prices rose steadily throughout '23 and 24Q1: the average price of copper in Shanghai in 2023 was 68,000 yuan/ton, +1.7% year-on-year. The average price of Shanghai copper in 24Q1 was 69,400 yuan/ton, +1.3% year over year and +2.6% month over month. 2) Production and sales of self-produced copper ore increased steadily, and the gross profit of the copper sector increased sharply over the same period last year: the company has its own mine, the copper mine, produced 43,200 tons of copper in 2023, +6.1% over the same period last year, with stable performance. The company's copper sector achieved gross profit of 1,184 billion yuan in 2023, +25.4% year-on-year. 3) Houma Beitong prepared materials in advance, and 24Q1 benefited from a sharp rise in volume and price: The company completed the acquisition of 100% of Houma Beicong's shares in August 2023, and its 800,000 ton copper concentrate comprehensive recycling project was basically completed and is in trial production, with a loss of 40 million yuan in 2023. By the end of 2023, the company's inventory value was 4.79 billion yuan, an increase of 3.11 billion yuan over the beginning of the year. It was mainly due to preparations for the Houma Beicong project. The increase in 24Q1 copper, gold and silver prices, and the increase in production and sales of Houma Beicong was the main reason for the increase in 24Q1 performance. 4) The precious metals sector increased profits and the sulfuric acid sector reduced profits: 2023 gold ingot production was 2.2 tons, +7.7% year over year, silver ingot production was 26.4 tons, -13% year over year, precious metals sector gross profit +4% year over year to 191 million yuan, and gross margin +4.2 pct to 16.9% year on year. Sulfuric acid production was 550,000 tons, +4.5% year over year, but due to pressure from sulfuric acid prices, gross profit of -90 million yuan was achieved, compared to 180 million yuan year-on-year.
We look forward to increasing reserves of our own copper resources and expanding the downstream industrial chain. 1) Upstream storage: By the end of 2023, the Tongkuangyu mine had 220 million tons of copper ore resources and 1.33 million tons of copper metal, with a geological average grade of 0.608%. The company is actively promoting exploration of deep resources in the Tongkuangyu mine. It is expected to increase copper ore reserves by 300 million tons and further extend the service life. 2) Strong downstream chain: Beitong New Material's new high-performance rolled copper strip foil and copper-clad plate project set an industry record of continuous rolling of 20,000 meters of 6-micron rolled copper foil, expanding the downstream market and driving the company to the upper end of the industrial chain.
Profit forecast and investment advice: The company's net profit from 2024 to 2026 is estimated to be RMB 10.32, 12.29, and RMB 1,356, respectively. Considering that the company's own copper mine is expected to increase its reserves and breakthroughs in the extension of the downstream industrial chain, the first coverage was given an “increase in holdings” rating.
Risk warning: demand falls short of expectations, project progress falls short of expectations, valuation model falls short of expectations, etc.