1) The company released its 2023 annual report. In 2023, the company achieved total operating income of 65.647 billion yuan, an increase of 18.42%; net profit to mother was 688 million yuan, a year-on-year decrease of 43.27%; net profit after deducting non-return to mother was 643 million yuan, a year-on-year decrease of 45.23%.
2) The company released its report for the first quarter of 2024. In 2024 Q1, the company achieved total revenue of 18.023 billion yuan, an increase of 7.33%; net profit to mother was 239 million yuan, a year-on-year decrease of 25.23%; and net profit after deducting non-return to mother was 235 million yuan, a year-on-year decrease of 23.94%.
Lead-zinc concentrate production declined in 2023, showing that copper smelters increased their performance. In 2023, the company's mining enterprises produced 275,600 tons of lead-zinc metal concentrate, up 0.57% year on year; its mining enterprises in China produced 170,400 tons of lead-zinc ore, down 6.22% year on year; smelters produced 845,800 tons of copper, lead and zinc products, up 42.49% year on year; of these, 403,500 tons of cathode copper were produced, up 59.49% year on year. In 2022, the company acquired CICC Copper, a copper smelting company. The net profit for the consolidated period in 2023 was 552 million yuan. The company actually owned 39.26% of CICC Copper's equity, and net profit attributable to shareholders of the parent company was 217 million yuan.
Expense rates fell month-on-month during 2024Q1
The company's expense ratio for the 2023 period was 2.74%, up 0.65 pct year on year; among them, sales/management/R&D/finance expenses were 0.23%/0.32%/0.66%/0.86%, respectively, -0.04/+0.07/-0.03/+0.69 pct year-on-year, respectively. In 2023, the company's financial expenses were 564 million yuan, an increase of 497.74% over the previous year; mainly due to the addition of copper smelting companies included in the scope of the consolidated statement, the loan scale expanded and interest expenses increased. The 2024Q1 company's expense ratio for the period was 1.98%, down 2.50 pct from month to month; among them, sales/management/R&D/finance expenses rates were 0.19%/0.87%/0.27%/0.65%, respectively, down 0.12/0.47/0.76/1.16 pct year-on-year, respectively.
Benefiting from rising metal prices, the company's profitability increased in 2024 Q1. As of 2024/4/30, the closing prices of Shanghai copper/zinc/lead futures were 8.22/2.35/17,400 yuan/ton, respectively, up 19.2%/8.7% from the beginning of the year. Benefiting from rising metal prices, the company's gross margin level increased. In 2024 Q1, the company's gross sales margin was 4.65%, an increase of 0.16 pct over the previous year. In 2024, the company's mining enterprise plans to complete 263,300 tons of lead and zinc concentrate, including 82,500 tons of lead metal and 180,600 tons of zinc; 12,700 tons of copper, 106.93 tons of silver, and 280 kg of gold; the smelting enterprise plans to complete 885,700 tons of lead, zinc ingots and zinc products, and 428,700 tons of cathode copper.
Profit Forecasts, Valuations, and Ratings
We expect the company's 2024-2026 net profit to be 960/11.30/1,363 million yuan, respectively, and EPS 0.26/0.30/0.36 yuan, respectively. Referring to comparable company valuations, we gave the company 20 times PE in 2024, with a target price of 5.11 yuan, maintaining a “buy” rating.
Risk warning: risk of falling metal prices, risk of overseas mine commissioning, risk of mine resource reserves, etc.