Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 11.531 billion yuan, an increase of 20.99%; achieved net profit attributable to mother of 3,099 billion yuan, an increase of 132.19% over the previous year; and realized net profit withheld from non-mother of 2,958 billion yuan, an increase of 125.26% over the previous year.

Key points of investment:

The company's operating performance in 2023 reached the best level in the same period, and full attention was paid to a reasonable return on investment for investors. Molybdenum prices closed at the end of 2023 but fluctuated sharply during the year. According to Antec data, the average price of 45% molybdenum concentrate in China was 3,852 yuan/tonne from January to December 2023, up 37.55% year on year; from January to December 2023, the average price of 60% molybdenum iron molybdenum was 252,200 yuan/ton, up 36.62% year on year. The company uses strong chain repair and chain extension as a starting point to accurately grasp market conditions, fully release production line capacity, and achieve the best level of business performance in the same period in history.

In 2023, the output of the company's main products reached the expected target, and the annual production of molybdenum concentrate (45%) was completed by 100.1%; among the two mines, the balance of mineral supply was significantly improved, the no-mine parking time was reduced by 83% year on year, gold and molybdenum Ruyang accelerated the peeling of Dongbang, and the mining efficiency was steadily improved. The operation rate of semi-automatic grinding reached 94.14%, an increase of 5.31% year on year; main line equipment failure and accident shutdowns decreased by 60.7% year on year. By product, in 2023, the company's molybdenum furnace materials/molybdenum chemical/molybdenum metal/other business revenue was 70.76/14.28/24.47/468 million yuan, up 22.14%/9.84%/41.02%/-21.58% year-on-year respectively; gross margin was 51.09%/57.98%/46.97%/-17.23%, respectively, up 15.16%/13.42%/10.20%/18.94% from the same period last year. The company's market value maintenance was effective, and full attention was paid to the reasonable return on investment for investors. Cash dividends of 967.9813 million yuan were paid in 2023. The company's stock price reached a maximum of 15.12 yuan/share during the year, a record high since 2015, and was included in the MSCI China Index and the Shanghai Stock Exchange 180 Index.

Recently, the molybdenum market has been steady, moderate and positive. According to Antec's statistics, the overall performance of the molybdenum market in the first quarter of 2024 was relatively stable, and molybdenum prices fluctuated within a narrow range. At the beginning of January, the price of 45% molybdenum concentrate was 3,170 yuan/ton, rising slightly to 3,300 yuan/ton in the middle of the month. Since then, the molybdenum market has remained volatile and consolidated. After the Spring Festival in February, as molybdenum market transactions increased, the price of 45% molybdenum concentrate rose to 3,360 yuan/ton. The price of molybdenum concentrate first rose and then fell in March. At the beginning of the month, as many mines concentrated on selling molybdenum concentrate, the price rose 45% to 3,430 yuan/ton. The market gradually cooled down in the middle and late stages, and the price of molybdenum concentrate fell back to around 3,300 yuan/ton at the end of the month. Since the beginning of April, the overall performance of molybdenum markets at home and abroad has been good, with molybdenum prices rising steadily; the domestic molybdenum concentrate market is relatively strong, and the phenomenon of cost inversion of molybdenum smelters is still quite obvious, and companies are still relatively cautious about purchasing raw materials; steel mills are gradually purchasing iron molybdenum, and frequent purchases by leading steel companies drive up molybdenum prices; as of the 3rd week of April, steel mills have once again surpassed 10,000 tons. The demand side performance is strong, and the raw materials market is still strong.

The company insists on innovation-driven development, and the supporting role of technical quality is constantly increasing. In 2023, the company strengthened the management of scientific research projects, implemented 49 scientific research projects, with an overall completion rate of 94.8%, and a cumulative R&D investment of 336 million yuan, laying the foundation for the three-year review of high enterprises; standardized the application and management of scientific and technological achievements, obtained 30 authorized patents, and applied for 37 projects in the Shaanxi Three New Three Small Innovation Competition, which won 19 awards; implemented 20 “four modernization” construction projects, data center expansion, smelting, small-particle molybdenum iron and molybdenum color selection, etc.; the remaining 12 projects are being implemented according to schedule; the remaining 12 projects are being implemented according to schedule; focusing on “three aspects” and continuing efforts to overcome pure molybdenum Powder removal Miscellaneous problems. It has the ability to stably produce 4N grade high-purity molybdenum powder in batches, prepared a series of molybdenum-rhenium alloy tube products, and obtained the first batch of 4.82 million procurement contracts from customers; quality management continued to improve, prepared a three-year quality work plan, published more than 600 copies of the new system documents, and carried out the quality management system replacement and promotion in an orderly manner.

The construction of the company's key projects is progressing in an orderly manner. The company has vigorously carried out the construction of key projects, investing 14.6 million yuan for the full year of 2023, completing 108% of the plan. The Northeast Assistance and Expansion Project has basically been completed, the mineral processing upgrade project is being further optimized, and the overall progress of the low concentration molybdenum roasting flue gas treatment project has been completed by more than 80%. The company implemented 34 technical improvement projects, invested 296.64 million yuan, and completed 104% of the plan; implemented 23 Anhuan projects, invested 11.82 million yuan, and completed 100% of the plan.

Maintain the company's “gain” investment rating. According to factors such as changes in the macro environment, we adjusted the company's 2024/2025 revenue of 130.36/13.624 billion yuan to 125.36/13.024 billion yuan, and adjusted the company's 2024/2025 net profit of 32.25/3.453 billion yuan to 32.41/3.373 billion yuan. The company's fully diluted EPS in 2024/2025/2026 is expected to be 1.00 yuan/1.05 yuan/1.09 yuan, respectively, according to the closing price of 11.94 yuan on April 24 Calculated, the corresponding PE is 11.89X/11.42X/10.92X, respectively. The molybdenum supply side has remained relatively stable. In terms of downstream demand, the company's specialty steel and other industries have maintained steady growth, supporting the price of molybdenum. It is expected that the company's revenue and profit will continue to grow. Currently, the company's valuation level is relatively reasonable, and the company's “increase” investment rating is maintained in line with the industry's development prospects and the company's industry status.

Risk warning: (1) the Fed's interest rate hike exceeded expectations; (2) international macroeconomic downturn; (3) geopolitical conflict intensified; (4) industry policy changes; (5) molybdenum and ferromolybdenum prices fluctuated greatly; (6) downstream demand fell short of expectations; (7) the company's production capacity supply fell short of expectations.