The company announced 24Q3 results: revenue of 1.395 billion yuan (yoy -14.01%, qoq -15.13%); net profit of 0.1 billion yuan (yoy -64.98%, qoq -57.83%). The month-on-month decline was mainly due to falling iron ore prices and rising shipping costs in the third quarter. 24Q1-3's cumulative revenue is 4.651 billion yuan (yoy +16.73%); net profit to mother is 0.578 billion yuan (yoy -13.38%). The company is actively improving iron ore delivery capacity. At the same time, the main construction of the second phase of the copper project is expected to be completed by the end of 24, which is expected to open up room for future growth and maintain a “buy” rating.

The decline in 24Q3 iron ore prices and the rise in shipping costs dragged down performance. According to the company's three-quarter report, the 24Q3 gross profit margin was 52.9% (yoy-9.7pct, qoq-13.2pct), or mainly due to the year-on-year decline in iron ore prices. According to the Dalian Commodity Exchange, the average settlement price of 24Q3 iron ore futures was 754.46 yuan/ton (yoy -8.1%, qoq -11.0%). In addition, the company's expense ratio was 45.5% (yoy+16.5pct, qoq+6.4pct) during the 24Q3 period, of which the sales expense ratio was 38.6% (yoy+14.8pct, qoq+3.7pct), or mainly due to the increase in the company's ore sales and shipping costs. The company's net sales margin was 7.4% (yoy-18.0pct, qoq-12.0pct).

Iron ore is mainly short-term or volatile, and medium-term supply pressure is high

In September, with the introduction of domestic economic support policies one after another, the steel industry also gradually emerged from the loss situation of the entire industry. By mid-October, the profit margin of 247 steel companies in the industry had risen to more than 70%, and steel prices and iron and water production had also rebounded. As a result, iron ore showed an improvement in the supply and demand pattern in the short term, and the 62% grade iron ore price index rebounded to around $100. We believe that since domestic iron ore statistically available stocks are still high and supply has not decreased, iron ore prices may remain mainly fluctuating at $90-100. However, for the medium to long term, according to public statistics such as the official websites of the four major mines, there are still tens of millions of tons of additional iron ore projects to be completed and put into operation overseas in 25, and global steel demand is stabilizing. Therefore, we believe that a significant increase in iron ore supply may put downward pressure on iron ore prices in the future.

A target price of 16.55 yuan was given, maintaining the “buy” rating

Considering the rise in sea freight prices, we assume that sales expenses will increase. The company's EPS is expected to be 1.21/1.43/1.65 yuan in 24-26 (previous value 0.142/0.157/0.181 billion yuan), respectively. Comparable, the company's PE (2025E) had an average value of 11.6X, giving the company an estimated PE value of 11.6 times in 25 years, corresponding to a target price of 16.55 yuan (previous value of 15.32 yuan), maintaining a “buy” rating.

Risk warning: Downstream demand falls short of expectations, and iron ore and shipping prices fluctuate.