Event: The company released its 2023 annual report and 2024 quarterly report. 1) 2023: The company achieved revenue of 4.79 billion yuan, -5.9% year-on-year, net profit of 140 million yuan, or -34.9% year-on-year, net profit of 190 million yuan after deducting non-attributable net profit of 190 million yuan, or -14.4% year-on-year. 2) 2023Q4: Achieved revenue of 1.07 billion yuan, -4.9% YoY, -24.4% month-on-month, net profit of 0.1 billion yuan, year-on-year to profit, -88.1% month-on-month net profit, year-on-year net profit of 0.3 billion yuan, year-on-year to profit, -63.1% month-on-month; 3) Dividends: In 2023, it is planned to distribute a cash dividend of 1.0 yuan (tax included) for every 10 shares, with a total cash dividend of about 21.4%; 4) 2024Q1: Achieving revenue of 1.31 billion yuan, +16.0% YoY, +22.3% month-on-month, Net profit to mother was 0.3 billion yuan, +73.1% year over month, +298.7% month on month, net profit after deducting non-return mother 60 million yuan, +70.4% year on year, and +129.8% month on month. Performance improved significantly from month to month.
Copper's contribution to performance increased dramatically, and falling prices dragged down the performance of cobalt products. In 2023, copper achieved revenue of 2.76 billion yuan, +9.3% year over year, and revenue share increased to 57.6%, and cobalt products achieved revenue of 1.80 billion yuan, down to 37.5% year on year, mainly due to falling cobalt prices; in terms of gross profit, copper achieved gross profit of 660 million yuan in 2023, +31.6% year over year, and gross profit ratio increased to 86.9%. Cobalt products achieved gross profit of 90 million yuan, -76.6% year over year, and gross profit share fell to 11.8%.
Copper volumes are rising rapidly, high inventories are expected to boost 24-year performance, and the profitability of cobalt products is declining. 1) Copper:
Production and sales in 2023 were 50,48,000 tons, +24.6% and +10.2% year-on-year, mainly due to the release of additional production capacity by the subsidiary Hanrui Metals. By the end of 2023, the company's copper inventory was 40,000 tons, +101.5%. Mainly due to the processing of export documents in the Democratic Republic of the Congo (DRC), it is expected to increase annual performance after sales are formed in 2024; in terms of profit, gross margin increased by 4.1 pct to 24.1% in 2023; 2) Cobalt: Production and sales in 2023 were 0.8, 90,000 metal tons, compared to -18.2%, + 24.2%; in terms of profit, the gross margin of cobalt products fell 10.2pct to 5.0% due to falling cobalt prices.
Future highlights: Copper and cobalt continue to expand, and Indonesia's layout of high-ice nickel opens up room for growth. 1) Copper: Hanrui Metals's 40,000 ton electrodeposit copper production expansion project was put into operation in December 2023. At the same time, the company continues to expand copper production capacity in the Democratic Republic of the Congo (DRC). The copper price is improving for a long time, and the copper sector's performance contribution is expected to continue to grow; 2) Cobalt: The 5,000 ton electrocobalt project was put into operation in July 2023. Ganzhou Hanrui has now formed a production capacity of 10,000 tons of cobalt. At the same time, the cobalt price has fallen to a historic low level. We expect the cobalt price to drag down the company's performance; 3) Nickel: Planned in Indonesia by the end of 2023 The 20,000 ton nickel high-metallicity ice nickel project uses an oxygen-rich continuous blowing process and is scheduled to be put into operation by the end of May 2025. According to the company's early research, based on the sales price of 14,600 US dollars/ton of nickel, the project achieved a cost of about 0.98 million US dollars per ton after production, and a net profit of about 0.3 million US dollars per ton, which is highly profitable.
Investment advice: Copper production capacity continues to expand, copper prices are improving for a long time, and the bottom of the cobalt price is showing signs. Indonesia has a high ice nickel layout. We expect the company's net profit to be 3.0/5.3/72 billion yuan in 2024-2026. PE corresponding to the closing price on May 10, 2024 is 34/19/14 times, covered for the first time, giving it a “careful recommendation” rating.
Risk warning: Production capacity release falls short of expectations, demand falls short of expectations, overseas business risk.