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中矿资源(002738):降本量增共振 盈利韧性显著

China Mining Resources (002738): Reduced costs, increased resonance, remarkable profit resilience

長江證券 ·  May 15

Description of the event

The company's net profit in 2023 was 2,208 billion yuan, -33% year-on-year; net profit after deduction of non-return to mother was 2.13 billion yuan, -34% year-on-year. 23Q4 net profit to mother was 138 million yuan, -89% YoY, -76% month-on-month; net profit without return to mother was 105 million yuan, -91% YoY, -80%.

Net profit of 24Q1 was 256 million yuan, -77% YoY, +86% month-on-month; net profit without return to mother was 228 million yuan, -79% YoY, +117% month-on-month.

Incident comments

Despite a sharp drop in lithium prices in 2023, the company maintained strong profit resilience under the dual drive of volume increase and cost reduction by increasing the ratio of additional lithium salt production capacity and self-supply of ore. In 2023, the company's lithium salt sector achieved revenue of 4.243 billion yuan, -33% year-on-year, accounting for 71%; gross margin bucked the trend and increased by 3.99 pct to 57.78% year on year. Along with the Bikita mine's 2 million tons/year spodumene addition project and the 2 million tons/year lithium permeation feldspar renovation and expansion project put into operation in July and the slope was accelerated, the company's lithium salt product structure shifted mainly from external mining+OEM to the main processing and production of its own ore, and resource guarantee and cost control capabilities were greatly strengthened. The company achieved 18,400 tons of lithium salt production in 2023, -20% year over year. Among them, lithium salt production reached 15,800 tons, and the self-sufficiency rate increased by 65 pcts to 86% year on year. Starting in the second half of the year, it maintained complete self-supply; sales volume of lithium salt was 17,400 tons, -28% year over year; and inventory volume was 1,698 tons, +93% year over year. In addition to the lithium salt business, the company's cesium-rubidium business performance is still impressive. In 2023, the company's cesium-rubidium salt division achieved revenue of 1,124 million yuan, or +21% year-on-year, accounting for 19%; gross profit of 724 million yuan, +20% year-on-year. As the downstream application field of cesium-rubidium salt accelerates, the company's leading edge in the industry will become more obvious. Looking at 23Q4 alone, the company's gross profit margin was 20.85%, 38.93pct month-on-month; net profit margin was 13.1%, -27.29pct month-on-month. There are two reasonable reasons: (1) the impact of the sharp drop in lithium prices in the fourth quarter; (2) the high local electricity costs in Zimbabwe and the decline in Dongpeng's lithium salt production capacity utilization rate, and the actual company's lithium salt production costs remained high.

The cost reduction effect was significant, and 24Q1 profit was significantly restored. 24Q1's gross profit margin was 38.07%, +17.22pct month-on-month; net profit margin was 22.32%, +9.22pct month-on-month. It is reasonable to speculate that there are two reasons: (1) although the average price of lithium salt declined month-on-month, the overall lithium price showed an upward trend, and the discount coefficient may increase compared to Q4; (2) the company's cost side or due to the fact that most of the ore raw materials in the current period were high-grade spodumene and photovoltaic and municipal electricity projects were put into use.

Build Alpha in the lithium sector by focusing on increasing volume and reducing costs. Resources: The Bikita 300,000 tonne lithium concentrate and the 300,000 tonne chemical-grade lithium-permeable feldspar concentrate project both reached production in November 2023; the Tanco 1 million tonne beneficiation project is expected to be completed by the end of 24; the Angolan lithium mine is progressing smoothly. Smelting: Chunpeng's 35,000-ton lithium salt project reached production in February 2024, and the lithium salt production capacity increased to 66,000 tons. Cost: (1) Previously, Bikita mine production mainly used diesel to generate electricity, and the cost was high, so the company built and laid out municipal power supply+photovoltaic projects to seek cost improvements. (2) Reduce the proportion of low-grade lithium permeable feldspar in raw materials and optimize costs.

The strategic layout of copper resources+smelting is expected to become the second growth pole. Resources: The company plans to acquire a 65% stake in the Kitumba copper mine in Zambia. With the company's advantages in geological exploration business and years of experience in resource allocation in Zambia, the Kitumba copper mine is expected to increase storage in the future. At the same time, the company is also actively seeking high-quality local copper resources and seeking additional resource reserves. Smelting: The company acquired 98% of the Namibian copper smelter Tsumeb. Currently, the smelter's concentrate processing capacity is 260,000 tons/year, and subsequent technological upgrades can be increased to 370,000 tons/year, while the by-product sulfuric acid further increases profits.

Strong exploration genes+high operating efficiency. Under multi-product resonance, China Mining will rise to the next level. In the future, the company will focus on the three major business segments of lithium, copper, and rare metals. Supported by excellent exploration capabilities and operating efficiency, the certainty of resource-side growth is worth looking forward to.

Looking backwards, with the three business segments of copper, lithium, and rare metals working together, the company's growth space is worth looking forward to: (1) The copper sector, from smelting to continue to increase resources, with long-term plans to produce 100,000 tons of copper per year, is expected to contribute to the company's core performance growth against the backdrop of a stable fundamental pattern in the copper industry and the expected steady rise in copper prices; (2) the lithium sector, resources and smelting are expanding simultaneously, with significant volume growth and elasticity, along with the launch of power projects, improvements in raw material product structure, and local currency risk alerts in Zimbabwe

1. Weak demand for new energy sources; 2. Delayed commissioning of the company's projects; 3. Risk of overseas resource allocation; 4. Profit forecasts fall short of expectations.

The translation is provided by third-party software.


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