Net profit due to mother in 2023 fell short of expectations, and 1Q24 results were basically in line with our expectations
The company announced 2023 and 1Q24 results, with revenue of $137.45 billion in 2023, +12.81% year on year; net profit attributable to mother of $2,699 billion, -1.1% year on year; net profit after deducting non-return to mother of $1,867 billion, -25.01% year on year, lower than our expectations. Net profit for 4Q23 was $123 million, -89% month-on-month, mainly affected by higher costs and expenses in the fourth quarter than expected and the calculation of asset impairment losses. The net profit for 1Q24 was 1,097 billion yuan, +7.9x month-on-month and +67.8% year-on-year, in line with our expectations.
Copper smelting and processing fees and copper prices rose year-on-year in 2023, boosting performance release, and copper prices remained high in 1Q24. In 2023, the average spot TC/RC value of domestic copper concentrate was 84.97 US dollars/ton, up 7.22 US dollars/ton. The average price of Shanghai copper was 6,8021 yuan/ton, +1.69% year on year, and the average price of domestic sulfuric acid was 237.05 yuan/ton, or -57.98% year on year. The average price of Shanghai copper in 1Q24 was 69,405 yuan/ton, +2.2% month-on-month, and remained high.
Development trends
The 70% equity injection in the Mirador copper mine has been completed, and it is expected that Mirador Phase II will be put into operation. On August 2, 2023, 70% of China Railway Construction Tongguan's shares were transferred to the company's name. According to the announcement, in terms of resource endowments, China Railway Construction Copper Crown holds 100% of Corriant Resources Company, with a total copper resource volume of 2527MT @0 .53%. In terms of production, the first phase of the Mirador mine reached production in 2021, and since then, it has contributed a considerable increase in copper concentrate to the company. The company expects the second phase to be completed and put into operation in June 2025. At that time, the company expects to produce about 250,000 tons per year. In terms of profitability, the net profit of China Railway Construction Tongguan in 2023 was 1,657 billion yuan, which is quite profitable.
Copper production in 2023 exceeded the guideline, the production of self-produced copper concentrate increased significantly year-on-year, and the 2024 guidelines were steady.
In 2023, the company produced its own copper concentrate containing 175,900 tons1 (guideline completion rate 350%); cathode copper 1.7563 million tons (guideline completion rate 103%), all of which rank among the highest in the country. In 2024, the company plans to produce 161,700 tons of its own copper concentrate containing copper and 1.73 million tons of cathode copper. The guidelines remain steady. By the end of 2023, the company's copper foil production capacity reached 55,000 tons, and the lithium battery copper foil production capacity was 25,000 tons/year using overfunded capital; the company expects the copper foil production capacity to reach 80,000 tons in the first half of 2024.
The 2024-2026 shareholder return plan was announced, demonstrating confidence in development. In 2023, the company distributed a dividend of 0.08 yuan per share and also announced the 2024-2026 shareholder return plan. On the basis of meeting the prerequisites, the next three years will use the cumulative cash distribution profit to achieve 50% distributable profit within three years.
Profit forecasting and valuation
We maintain the outperforming industry rating and 2024 profit forecast, and introduced a profit forecast of 4.81 billion yuan for 2025. Considering that the non-ferrous industry may be undergoing a full revaluation and the company's production capacity growth potential, we raised the target price by 25% to 5 yuan. The current stock price corresponds to 2024-2025 13.1x/10.6x P/E, and the target price corresponds to 2024-2025 16.1x/13.1x P/E, with 24% upside compared to the present.
risks
The project fell short of expectations, and copper smelting and processing costs fell short of expectations.