Event: CICC Lingnan publishes its semi-annual report 2023. The company's 23H1 income is 37.227 billion yuan, + 3.76% compared with the same period last year, and the net profit is 540 million yuan,-36.34% compared with the same period last year. Of this total, the single Q2 income was 20.436 billion yuan,-3.36% year-on-year, and the net profit was 220 million yuan,-57.35% compared with the same period last year.

The output of lead and zinc concentrate decreased, and the contribution of copper smelting increased. Sub-products: 1) the income of concentrate products of 23H1 Company is 1.196 billion yuan, which is-28.02% of the same period last year and-1.54% of the same period last year. Among them, domestic mining enterprises produce 82800 tons of lead and zinc ore metal, which is-11.44% of the same period last year. 2) the income of the company's 23H1 lead and zinc smelting products is 3.505 billion yuan, which is-2.12% of the same period last year. The smelting enterprise of the company produces 215200 tons of lead and zinc products, which is + 27.64% of the same period last year. 3) the income contributed by 23H1 from copper smelting business is 13.224 billion yuan. 4) the company reduced its non-ferrous metals trading business, with 23H1 revenue of 18.665 billion yuan,-39.05% of the same period last year.

Metal prices are under pressure from downward profits and interest payments have increased. 23H1 achieved a gross profit margin of 4.40%, year-on-year-0.21pct, and a net profit rate of 1.89%, year-on-year-0.51pct. According to the business society, the average domestic spot price of zinc, lead and copper in 23H1 is-14.5%, 0.23% and-5.3%, respectively. Product gross profit margin: concentrate products 19.43% (year-19.9pcts); lead and zinc smelting products 19.26%, (year-2.6pcts); copper smelting products 3.99%. From the point of view of expense rate, the company's 23H1 sales / management / R & D / financial rates are 0.2%, 0.4%, 0.8%, 0.5%, respectively, and the financial expenses are also increased by 122%, mainly due to the expansion of the loan scale and the increase in interest expenses.

Investment suggestion

At present, the company has formed an annual production capacity of 300000 tons of lead and zinc mining and separation, with steady progress in production expansion projects and exploration and storage. We estimate that the company's net return profit for 2023-2025 will be 1.241164pm 2.09 billion respectively (the previous net profit for 2023-2024 is 1.90.27.5 billion RMB, carefully considering the downside risk of lead and zinc prices), corresponding to a PE of 16.4pm 12.4pm 9.7 times, maintaining the "buy" rating.

Risk hint

Project capacity expansion is less than expected; overseas investment risks; commodity prices fluctuate sharply.