Key points of investment

According to the company's 2023 annual report and 2024Q1 quarterly report, the company's revenue in 2023 was 24.456 billion yuan, a year-on-year decrease of 5.33%; net profit to mother was 265 million yuan, reversing the year-on-year loss. In 2024, Q1 achieved operating income of 5.961 billion yuan, a year-on-year decrease of 3.67%; net profit to mother was 289 million yuan, an increase of 553.39%; and deducted non-net profit of 341 million yuan, an increase of 668.54% over the previous year. The company's performance improved dramatically, mainly due to the expansion project to achieve full production, copper production increased sharply year on year, and product prices rose year on year.

The volume and price of the company's copper products business rose sharply in 2023, and gross profit increased significantly. In 2023, copper product output was 102,200 thousand metal tons, up 76.98%; copper products achieved revenue of 5.613 billion yuan, up 81.06% year on year, gross profit margin of 33.6%, up 15.91 percentage points year on year; cobalt product output was 12,400 metal tons, up 13.47% from the previous year, achieving revenue of 1,191 billion yuan, down 15.40 percentage points from the previous year; nickel; Product output was 41,600 tons of metal, down 2.94% from the previous year, and achieved revenue of 4.211 billion yuan, down 18% from the previous year. The gross profit margin was 13.09%, a decrease of 10.57 percentage points from the previous year.

The expansion of the gold-copper-cobalt sector in the Congo progressed steadily. The production capacity reached 160,000 metal tons by the end of 2023, and the company's total copper production capacity in the Democratic Republic of the Congo (DRC) reached 160,000 metal tons per year. The Kalongwe integrated copper and cobalt mining and metallurgy project was completed and put into operation. The copper production capacity will be expanded from 30,000 to 50,000 metal tons in the second half of 2023. The company efficiently promoted the new copper-cobalt project Brother Mining (BMS) 50,000 metal-ton copper smelting project in cooperation with partners, and successfully produced the first batch of copper products in December 2023, which will further increase the company's copper smelting production capacity in the future. In addition, the FTB exploration project is adjacent to the Kalongwe project. The mining area covers an area of about 334 square kilometers, covering the western part of the Lufiri Arc, which is one of the richest copper-cobalt zones in the world. The company continues to carry out exploration work in the FTB area to provide the company with a resource guarantee for continuous development.

Indonesia's nickel production and operation is stable, and deep processing is progressing steadily

In 2023, Youshan Nickel had good business performance and stable production, achieving annual revenue of 3,551 billion yuan and net profit of 570 million yuan. The company actively promoted the construction process of the Guizhou New Materials Project. The 150,000-ton nickel sulfate production line of the first phase of the Guizhou New Materials Project officially produced the first batch of nickel sulfate products in December 2023. Sales have now been achieved, and the product quality has been certified by mainstream customers. The second phase of the project is still under construction, and 95% of the factory site leveling work has been completed by the end of 2023.

Zinc smelting's profit in 2023 fell short of expectations. Domestic mine construction progressed steadily, and Shengtun achieved full production of zinc and germanium within 2023. Due to rising electricity prices, phased electricity restrictions, etc., the profit fell short of expectations due to rising electricity prices, phased electricity restrictions, etc., compounded by rising raw material costs. Dali Sanxin obtained a mining license at the end of August 2023; Emma Mining completed deep exploration and mining in December 2023 and obtained a mining license; Hengyuan Xinmao is actively studying the selection plan and is expected to obtain a mining license in 2024. The Huajin Mining Selection Plant is currently accepting commissioned processing operations for the production of lithium concentrate. The company will actively accelerate mine construction work according to the construction plan. It is expected that the Dali Sanxin copper mine will be completed and put into operation from the end of 2024 to the beginning of 2025. Other domestic mines will also continue to optimize production and construction plans to contribute profitably to the company's basic metals business segment.

The company continued to steadily expand copper production in 2024. Stable production of other products According to the company's annual report, the company's production and operation goals in 2024: achieve copper production of 150,000 metal tons, of which mineral copper is not less than 50,000 metal tons; cobalt products produce 14,000 metal tons (including materials); nickel products produce 60,000 metal tons (including materials); and 320,000 tons of zinc ingots.

Profit forecasting and valuation

Due to the fluctuating upward trend in copper prices since 2024, compounded by the release of the company's copper sector production, the company's first-quarter performance exceeded expectations. We raised the company's profit. We expect the company's net profit to reach 980.4/11.72/1,244 million yuan respectively in 2024-2026, up 270.4%, 19.5%, and 7.0% year-on-year respectively, maintaining the company's purchase rating.

Risk warning

Metal prices fluctuate greatly, and the risk of overseas operation of the company's projects