An established Western mining leader that mainly focuses on copper. The company that gives “additional wealth” ratings is an established Western mining leader that mainly focuses on copper. The company's main source of profit is the continued expansion of capacity at Yulong Copper Mine, compounded by expectations of rising copper prices. The volume and price of the company's mineral copper is expected to rise rapidly, leading the company's growth. Furthermore, the company actively lays out other varieties to reserve potential profit growth points. We expect an EPS of 1.63/1.87/2.28 yuan in 2024-2026, which is comparable to the company's 2024 Wind unanimous expectation of 13.6X PE, giving the company 13.6X PE in 2024, corresponding to a target price of 22.1 yuan, giving it an “increase” rating.

Copper and molybdenum: The main mineral Yulong continues to expand its capacity, and the mineral copper is expected to rise rapidly. The company's main mine, Yulong Copper Mine, is a rare large-scale single copper mine in China. It is rich in resources and has a large scale of mining, and is accompanied by molybdenum. Production has been expanded three times since production was put into operation in 2016:1) The second phase of production was put into operation at the end of 2020, and copper became the company's main source of profit in 2021; as of 2023, the company's copper+molybdenum accounted for 70% of the company's gross profit. Among them, Yulong Copper Mine contributed more than 90% of mineral copper production and 100% molybdenum production. 2) The second phase of the renovation and expansion project was completed in November 2023, and the company's total mineral copper output is expected to increase by about 20% year-on-year in 2024. 3) Currently, a third phase of the project is planned. It is expected that the copper production capacity of Yulong Mining will increase by more than 20% after it is put into operation in 2025. At the current time point, the company's main source of profit has increased significantly. Looking ahead to copper prices, supply-side constraints are strong. Demand is driven by new energy sources and power grids, and economic recovery is helping. We believe that the upward movement of copper prices in the medium term is highly predictable.

Other varieties: Active layout, reserve potential profit growth points

In terms of lead and zinc, the Xitieshan lead-zinc mine is the foundation for the company, and Huidongdaliang and others also contributed to production. The company is currently an important domestic producer of lead-zinc concentrate, with a total production of 180,000 tons of lead and zinc in 2023. In terms of iron ore, the company produced 1.19 million tons of iron powder in 2023. The medium term expansion relied on Shuangli iron ore, and the long-term aim was to integrate resources in Haixi Prefecture. In terms of smelting, after the completion of the Xiyu metal transformation project, the company's electric lead production capacity will reach 200,000 tons, and Qinghai Xianghe will have a production capacity of 120,000 to 130,000 tons of zinc products. In terms of salt lake chemicals, the company relies on the Qinghai Tuanjiehu magnesium salt mine. Magnesium Chemical has reached maturity, producing 128,000 tons of high-purity magnesium hydroxide in 2023; participants developed Ginnell Salt Lake in Dongtai, which has a 20,000 ton electric carbon production line.

The target price is 22.1 yuan, giving it an “increase in holdings” rating

Given the high predictability of the upward movement of copper prices, we assume that the 2024-2026 copper price is 9,500/10,000/10,500 US dollars/ton, and the net profit to mother for 2024-2026 is estimated to be 38.78/44.50/5.435 billion yuan, respectively, corresponding to EPS 1.63/1.87/2.28 yuan. The main business of the company is copper, with copper accounting for 56% of gross profit in 2023, so it uses Zijin Mining, Luoyang Molybdenum, Jiangxi Copper, Tongling Nonferrous, and Yunnan Copper, which are major A-share copper brands, as comparable companies. Comparatively, the company's 2024 Wind unanimously anticipated 13.6X PE and gave the company 13.6X PE in 2024, corresponding to a target price of 22.1 yuan, giving it an “increase in weight” rating.

Risk warning: The construction progress of the company's new construction and production expansion projects fell short of expectations; global copper supply exceeded expectations; downstream copper demand fell short of expectations.