The company's net profit to mother fell 43% year over year in 2023. In 2023, the company achieved revenue of 65.6 billion yuan (+18.5%), net profit attributable to mother of 690 million yuan (-43.3%), net profit after deducting non-return to mother of 643 million yuan (-45%), and net operating cash flow of 1.57 billion yuan (+45.3%). The company's profit decline in 2023 was mainly due to falling lead and zinc concentrate production. In 2023, the average annual domestic zinc spot price was 2,1635 yuan/ton, a year-on-year decrease of 14.2%; in 2023, the company's domestic production of lead-zinc concentrate was 170,400 tons, down 6.2% year on year.
In terms of subsidiaries, the increase in profit mainly comes from the acquired copper smelter, Shandong Zhongjin Copper. In 2023, Zhongjin Copper produced 403,000 tons of cathode copper, with a net profit of 550 million yuan, and a shareholding ratio of 39.26% of listed companies; the profit reduction mainly came from the subsidiary Pelya, which lost 301 million yuan in net profit in 2023, and made a profit of 54 million yuan last year.
Foreign copper projects will become an important profit growth point. Looking ahead to 2024, low processing fees for copper concentrate and low processing fees for zinc concentrate, which have been rare for many years, will put some pressure on the smelting business, but benefiting from rising prices of copper, zinc, and lead, the company's concentrate product profits will increase. Looking at the longer term, Maimon Mine will produce 30,000 tons of copper and 30,000 tons of zinc per year after production is put into operation, which will become an important profit growth point for the company.
Risk warning: There is a risk that copper and zinc prices or copper concentrate processing fees will fall, and the mine commissioning progress will fall short of expectations.
Investment advice: Maintain an “increase in holdings” rating.
Assuming that the 2024-2026 zinc price is 23,000 yuan/ton (previous value 22,000 yuan/ton), lead price is 17,000 yuan/ton (previous value 15,500 yuan/ton), zinc concentrate processing fee is 4,000 yuan/ton (previous value 5,000 yuan/ton), and lead concentrate processing fee is 900 yuan/ton. The price of copper was 75,000 yuan/ton (previous value 68,000 yuan/ton), and the processing fee for copper concentrate was 60/70/70 US dollars/ton (previous value was 88 US dollars/ton). The net profit received from the company was 7.83/8.65/1,223 billion yuan, respectively, with a year-on-year growth rate of 13.8/10.5/41.4%, and diluted EPS was 0.21/0.23/0.33 yuan, respectively. The current stock price corresponds to PE 23.5/21.2/15.0x, respectively. The company is a leading domestic manufacturer of lead-zinc mining, selection and metallurgy. It has high-quality lead-zinc mines such as Fankou lead-zinc ore, and has proven total non-ferrous metal resources such as copper, zinc and lead, and is close to 10 million tons, fully benefiting from the upward trend in copper, lead and zinc prices. The company officially entered the copper industry chain through the merger and acquisition of the Dongying Fangyuan Copper Smelter, further opening up growth space and maintaining a “gain” rating.