Key points of investment:
Incident: The company announced its 2023 results, which are generally in line with expectations. 1) In 2023, we achieved revenue of 42.75 billion yuan (yoy +6.2%) and net profit of 2.79 billion yuan (yoy -18.4%), mainly due to fixed asset disposal losses of 370 million yuan, increased management expenses and R&D expenses, as well as a decrease in investment income from Dongtai Lithium Resources and a drop in zinc prices, after deducting net profit of 2.56 billion yuan (yoy -21.7%). The non-recurring profit was mainly 190 million yuan (yoy -21.7%) of the November disposal joint company (Xigang Group).
2) 2023Q4 achieved revenue of 10.51 billion yuan (yoy -18.1%, qoq +10.1%), net profit to mother of 590 million yuan (yoy -43.0%, qoq -14.4%), net profit of 210 million yuan (yoy -77.2%, qoq -75.7%). 3) Dividends: 10 payouts, with a dividend rate of 43%. The company announced a shareholder return plan for the next three years (2024-2026). The cumulative profit distributed in cash for the last three years is not less than 30% of the average distributable profit achieved in the last three years.
According to the company's annual report, production volume in 2023:60,000 tons of lead metal (yoy +17%); 120,000 tons of zinc metal (yoy +7%); 131,000 tons of copper metal (yoy -9%); 3401 tons of molybdenum metal (yoy +2%); 1.19 million tons of iron powder (yoy -34%, mainly planned shutdown). Planned production volume for 2024:52,000 tons of lead concentrate, 109,000 tons of zinc concentrate, 159,000 tons of copper concentrate, 3,995 tons of molybdenum concentrate, and 1,427 million tons of iron powder.
Key project progress: Yulong copper mine technical reform put into operation, and Shuangli iron ore renovation and expansion started. According to the company's annual report, 1) Copper mine: The company mainly owns the Yulong Copper Mine in Tibet and the Hugeqi Copper Mine in Inner Mongolia. Among them, the technical transformation and upgrading project of the Yulong Copper Mine 1 and 2 Plant was put into operation in November 2023, and the ore processing capacity increased to 22.8 million tons/year. 2) Iron ore: The company mainly owns Inner Mongolia Shuangli Iron Mine, Hami Baishanquan iron ore, Subei Qijiaojing iron ore and iron polymetallic ore in the lower reaches of the Gaoli River in Laling, Qinghai. The construction of the Shuangli Mining No. 2 iron ore renovation and expansion project began in April 2023. The project was designed to extract 3 million tons/year of iron ore, 200,000 tons/year of copper ore, and 200,000 tons/year of lead/zinc ore; acquired 100% of Xingan Mining's shares and increased exploration rights for golmud and Wenchahan iron polymetallic ore. Iron ore resource reserves are 45.6 million tons. 3) Xiyu Polymetallic Resources Comprehensive Recycling and Environmental Upgrading Project: Construction will begin in April 2023. After completion, it will have an annual production capacity of 200,000 tons of lead, 6 tons of gold ingots, and 430 tons of silver ingots, while efficiently recycling valuable metals such as copper, zinc, antimony, bismuth, and tin.
Maintain an increase in holdings rating. Maintaining the original profit forecast and adding the 26-year profit forecast, we expect the company's net profit to be 34.5/37.5/4.02 billion yuan for 24-26, respectively, and the corresponding PE is 13/12/11x. We expect copper prices to continue to rise. The company's Yulong copper mine will be renovated and expanded and put into operation. The volume and price have risen sharply, and the performance growth rate will be maintained.
Risk warning: Prices of basic metals such as copper fell, expansion project progress fell short of expectations, and production fell short of expectations.