Incident Overview

1) The company released its 2023 annual report. The 2023 revenue of 7.399 billion yuan increased 38.18%; net profit to mother of 1,031 billion yuan increased 68.74%; net profit after deducting non-return to mother of 1,028 billion yuan increased 67.45%; net cash flow from operating activities of 1,085 billion yuan increased 13.38%. The performance was in line with market expectations, and the net cash flow slightly exceeded profit, showing high quality growth and the quality of financial reporting.

2) The company released its report for the first quarter of 2024. In 24Q1, revenue of 1,973 billion yuan increased by 33.67%, net profit to mother of 274 million yuan increased by 48.07%, and net profit after deducting non-return to mother increased 46.03%; revenue for the first quarter exceeded 30%, which was the fastest revenue growth quarter since the company went public, and the growth rate on the performance side was also the fastest since listing. We believe that the performance is in line with market expectations. The first quarterly report officially announced that the latter of the company's “Mining Service+Resources” two-wheel drive has begun to gain significant strength.

The annual results were in line with market expectations, and the mining services business grew rapidly and gross margin increased. In terms of revenue split, the company's mining service business revenue of 6.6 billion yuan increased by 25.52% in 2023. Revenue growth services will greatly exceed the revenue growth rate in previous years. The growth of the main business reflects the blossoming of a replicable “management and technology output+localized operation” overseas business model under the overseas strategic “big market, big owner, big project” overseas operation business model. The company undertook 40 large-scale mining projects and mining operation projects at home and abroad, with a mining volume of 39.33 million tons in 2023. Mining operations accounted for 60.56% and mine engineering accounted for 26.85% during the reporting period. The company's overall overseas revenue share reached 63% (including resource products, etc.). The overall structure of the company's mining services business is healthy, and the operation category accounts for more than 60%. The overall gross profit margin of mining services was 28.95%, an increase of 1.37 pct over the previous year. Factors such as business structure optimization and the upward environment for copper prices led to a further increase in gross margin.

The mining resources development business will be completed in 2023. Resource development business revenue of 626 million yuan in 2023 increased by 100%, of which sales of copper concentrate of 15,900 tons increased by 100%, equivalent to 10201.52 tons of copper concentrate (3612.29 tons of copper concentrate at the end of the period), and sales volume of phosphate ore increased 100% of 160,000 tons; cathode copper production and inventory volume were 4621.82 tons, not sold abroad. Among them, the semi-finished copper concentrate produced had to be smelted and processed; 2023 was the first year when resource development entered the harvest period, and the company's copper concentrate sales revenue accounted for 6.84% during the reporting period. Gross profit margin remained stable in 2023. According to the table, the unit price was 50,600 yuan (i.e. tax not included); phosphate ore sales accounted for 1.62%, or 119.9 million yuan, corresponding to the apparent unit price of 749 yuan (excluding tax; market price fluctuates between 900 and 10,000 yuan/ton). The grade of the company's phosphate ore raw ore was 30.31%, and 300,000 t/a in the southern district was also under construction (3-year construction period). We believe that the rapid rise in international copper prices after entering 2024 reflects the continued interpretation of the trend of tight balance between supply and demand. The company's copper mine is expected to benefit significantly from the rise in copper prices in 2024; phosphate ore is expected to continue to benefit from the development of new energy sources and rising demand for chemical fertilizers.

2024Q1 performance was in line with expectations, and mine resource development was greatly strengthened. According to the quarterly report disclosed by the company, in 2024, mining services of 1.55 billion yuan increased 7.31%, and gross profit of 406 million yuan increased by 6.99%, that is, the estimated gross profit margin was 26.16%, an increase of 0.67 pct compared to 23Q1. The growth rate of the mining service business has narrowed due to seasonal maintenance, and we judge that the growth center for the whole year is still relatively fast. The increase in gross margin proved the quality and operational capacity of the project; revenue from the mining resource development business increased by 34.26% to 389 million yuan, and gross profit of 169 million yuan increased 100%, and the estimated gross profit margin was 43.49%. However, the share of resource revenue in the first quarter of the company's total revenue increased to 19.74%. Production increased rapidly after the L mine was put into operation last year, and it will climb quarterly in 2024. However, after the rainy season in Africa, it is expected that the share will increase further, and mine resource development will gain significant strength. Earlier, the company acquired the Lubambe copper mine, and it is expected that the company's copper production will increase significantly in the future.

Investment advice

In view of the current upward trend in resource commodity prices, we raised our revenue forecast for 2024-25 to 103.37/1 2.379 billion yuan (original 99.16 billion yuan /118.05 billion yuan), and raised the net profit forecast to mother to 17.79/2.32 billion yuan (originally 1.755/2.78 billion yuan), and the corresponding EPS forecast is 2.8 8 /3.6 1 yuan/share; the additional operating income/net profit to mother and EPS for the year 2026 15.406 billion yuan/2,889 million yuan/466 yuan; corresponding to the closing price of 53.52 yuan on April 30, 1.8.58/14.8 1/11.48 x PE, maintaining the “buy” rating.

Risk warning

International copper prices have dropped sharply, acquisition progress and operations have fallen short of expectations, existing copper production volumes have fallen short of expectations, systemic risks, etc.