The company disclosed 23 years of results. The company achieved net profit of 2,789 billion yuan in '23, a year-on-year decrease of 19.06%; realized net profit withheld from non-mother of 2,556 billion yuan, a year-on-year decrease of 21.74%. Looking at a single quarter, the company achieved net profit of 592 million yuan in Q23, down 43.77% year on year and 14.39% month on month; realized net profit deducted from non-return to mother was 209 million yuan, down 76.77% year on year and 75.72% month on month. The company's 23-year profit distribution plan is to distribute cash dividends of 5 yuan (tax included) for every 10 shares, with a total distribution of 1,192 billion yuan, with a dividend distribution ratio of 43%.
Results declined year over year in '23. 1) Metal prices declined: The average spot price of battery-grade lithium carbonate/zinc fell 47%/14% year on year. The company enjoyed a year-on-year decline in investment income from Dongtai lithium resources and the gross profit contribution of zinc concentrate.
2) Slight increase in cost ratio: The total cost rate for 23 years was 5.47%, up 0.36 pct from '22, with management expenses and R&D expenses increasing by 0.21/0.35 pct respectively. 3) Increase in the scale of non-operating expenses: Non-operating expenses of 388 million yuan in '23 were mainly due to the scrapping of some assets due to technical reforms in Yulong Copper.
The planned growth rate for copper concentrate reached 21% in '24. In '23, the company's copper concentrate/zinc concentrate/lead concentrate production was 1313/1203/60,300 tons, a year-on-year change of -9%/7%/17%; sales volume was 13.45/12.05/60,300 tons, respectively, a year-on-year change of -5%/7%/17%. The Yulong Copper technical improvement project was put into operation, and the mine's production capacity was effectively increased. In '24, the company plans to produce 15.87/10.94/51,800 tons of copper concentrate/zinc concentrate/lead concentrate, a year-on-year change of 21%/-9%/-14%.
Key resource-side projects are progressing smoothly. 1) Copper sector: The Yulong copper mine renovation and expansion project was completed, and the processing capacity of the plant was raised to 22.8 million tons/year. According to the Western Mining Group official account, the annual copper metal production will increase from 120,000 tons to 150,000 tons. 2) Lead-zinc sector: The mining rights for the Xiacun silver polymetallic mine applied for capacity expansion and obtained a new mining license in '23; the Western Copper Polymetallic Mineral Processing Technology Improvement Project is scheduled to be completed and put into operation in '24. 3) Iron sector: The Qijiaojing Vanadium and Iron Ore in Subei went through the mining license expansion procedure in '23; Shuangli Iron Ore started a land transfer project; Wenchahan and its Wenchahan mining area owned by Golmud West Mine Resources are undergoing exploration and transfer procedures.
Smelting side profits have improved. At the smelting end, the company has developed production capacity of 210,000 tons/year of electrolytic copper, 100,000 tons/year of zinc ingots, 100,000 tons/year of electric lead, and 2,000 tons/year of ammonium metavanadate. In 21-23, the total net profit of the company's Western Copper, Qinghai Copper and Xiyu Metal was 0.67/2.48/0.32 billion yuan respectively, and profitability improved.
Profit forecasting and valuation. The company has excellent resource endowments, and with the commissioning of the Yulong Copper renovation and expansion project and the advancement of other key projects, we expect that the company's performance will usher in a period of rapid growth, and that the company's dividend ratio will remain at a high level, with a strong margin of safety. We expect the company's 24-26 EPS to be 1.48, 1.61, and 1.67 yuan/share, respectively. Referring to comparable company valuation levels and the company's historical valuation level, a PE valuation of 14-15 times 2024 is given, corresponding to a reasonable value range of 20.71-22.19 yuan/share, and a “superior to the market” rating.
Risk warning. Production expansion fell short of expectations; copper prices fell short of expectations; raw material costs rose.