The company released its 2024 three-quarter report

The company's revenue for the first three quarters of 2024 was 2.324 billion yuan, or -44.53%; net profit to mother was 1.868 billion yuan, or -37.08% YoY; net profit not attributable to mother was 1.847 billion yuan, or -37.38% YoY. Among them, Q3 2024 revenue was 0.562 billion yuan, -59.65% YoY and -51.02% month-on-month; net profit to mother was 0.571 billion yuan, or -39.42% YoY and -25.63%. Net profit after deducting non-return to mother was 0.569 billion yuan, -40.08% YoY and -18.69% YoY.

Julong Copper's investment income increased sharply year-on-year, and lithium carbonate costs declined

Potassium chloride: (1) In terms of production and sales, in the first three quarters of 2024, the company's production of potassium chloride was 0.7562 million tons, and the planned annual production was raised to 1.05 million tons. The first three quarters completed 72.0% of the annual plan, -1.32% year-on-year; sales volume was 0.715 million tons, achieving 68.6% of the annual sales target, or -28.22% year-on-year. Among them, 2024Q3 potassium chloride produced 0.2334 million tons, or -35.91% month-on-month; sales volume was 0.1749 million tons, or -56.33% month-on-month. (2) In terms of price cost, in the first three quarters of 2024, the company's average sales price of potassium chloride was 2301.21 yuan/ton, -15.40%; the average sales cost was 1210.10 yuan/ton, +16.84% year-on-year; the average gross profit was 826.4 yuan/ton.

Lithium carbonate: (1) In terms of production and sales, in the first three quarters of 2024, the company's lithium carbonate production was 9277.5 tons, +12.84% year over year. The planned annual output was raised to 11,200 tons, completing 82.8% of the annual plan in the first three quarters; sales volume was 10210 tons, +31.56% year over year, achieving 97.2% of the annual sales target. Among them, 2024Q3 lithium carbonate produced 3468.5 tons, +1.31% month-on-month; sold 2,580 tons, -29.51% month-on-month. (2) In terms of sales cost, in the first three quarters of 2024, the average sales price of the company's lithium carbonate was 89250.72 yuan/ton, -63.73%; the average sales cost was 39795.50 yuan/ton, +2.39% year-on-year, but there was a decrease from the average cost in the first half of the year; the average gross profit was 39,187.4 yuan/ton.

Copper mine: The company holds 30.78% of Julong Copper's shares. In the first three quarters of 2024, the company achieved investment income of 1.363 billion yuan, or +33.88% year-on-year investment income. In the first three quarters of 2024, Julong Copper produced 0.122 million tons of copper, achieving revenue of 9.272 billion yuan and net profit of 4.428 billion yuan.

Among them, in Q3 2024, Julong Copper produced 0.041 million tons of copper, achieving revenue of 3.155 billion yuan, net profit of 1.65 billion yuan, and confirmed investment income of 0.508 billion yuan.

The Mamicuo project promoted the processing of mining rights, and the Laos potash mine project received a new license

Mamicuo Project: The approval of the Tibet Mamicuo project is proceeding simultaneously with the issuance of warrants. Among them, the Tibet Autonomous Region Development and Reform Commission submits an application report to the government, and the Natural Resources Department of the Autonomous Region submits an application for the issuance of a warrant to the government for the mining warrant. Up to now, the project has been reported to the autonomous region government and is awaiting approval. Applications for the issuance of mining warrants are in progress.

Laos potash mine project: The company's subsidiary, Zangge Laos Development, has obtained 157.72 square kilometer potash deposit certificates in Setani County and Bavo County in Vientiane, Laos. Within 157.72 square kilometers of potash, the amount of potassium chloride resources is about 0.984 billion tons. Currently, the “Project Feasibility Study Report” for the potash mine in Bao'ao County, Vientiane City, Laos has been prepared and is awaiting review, and the “EIA Report” is being prepared.

Jieze Chaka and Longmucuo Salt Lake: The Tibet Tibetan Youth Fund, a wholly-owned subsidiary of the company's wholly-owned subsidiary, acquired 39% of Guoneng Mining's shares with 4.08 billion yuan in cash and 0.6 billion yuan respectively, and completed the business change registration procedure on October 11, 2024.

After the shareholding change, Tibet City Investment held 41% of the shares, the Tibet Tibetan Youth Fund held 39% of the shares, Shanghai North Enterprise (Group) held 20% of the shares, and the company held 21% of the shares. The renewal of the Chaka Salt Lake mining license has been completed. The production capacity plan is to produce 0.06 million tons of lithium salt per year, including the 0.03 million ton industrial-grade lithium hydroxide project and the 0.03 million ton battery-grade lithium carbonate project. The renewal of the Longmucuo Salt Lake mining license has been completed. The production capacity plan is to produce 0.07 million tons of lithium salt per year. The “Feasibility Study Report” and “Development and Utilization Plan” of the project have been reviewed and approved, the EIA report has been prepared and publicized, and the EIA approval process is continuing.

Investment advice:

Supply on the copper mine side is limited and demand is growing over a long period of time, and the copper price center is expected to move upward. As Julong Copper's production capacity expansion progresses, there is considerable room for investment income growth. Lithium prices have entered the bottom range. The company's lithium salt has a low cost advantage, and the first 0.05 million ton construction work of Mamicuo Salt Lake continues to advance.

The company's high dividends highlight the value of the investment. The estimated revenue for 2024-2026 is 3.199, 4.108, and 5.23 billion yuan, respectively, and the net profit is 2.486, 3.443, and 4.699 billion yuan, and the corresponding EPS is 1.57, 2.18, and 2.97 yuan/share, respectively. Currently, the corresponding PE price is 18.0, 13.0, 9.5 times, maintaining an “increase holding-A” rating, and a target price of 33.15 yuan/share for 6 months.

Risk warning: demand falls short of expectations, metal prices fluctuate greatly, and project progress falls short of expectations