Key points of investment:
The company is a leading mining enterprise in western China, and the multi-variety layout is developing steadily. The company is a company mainly engaged in the extraction, smelting and trading of non-ferrous metals such as copper, lead, zinc, iron, nickel, etc., wholly-owned or controlled and operated 14 mines. By the end of 2023, it had total resource reserves of 6.05 million tons of copper, 1.55 million tons of lead metal, 2.7 million tons of zinc metal, and 300.11 million tons of iron (ore volume). It is the second largest producer of lead-zinc concentrate and the fifth largest copper concentrate producer in China.
Mine+Salt Lake are working together, and the company is still growing. 1) Core mine increase: ① Tibet Yulong Copper Mine is the company's main mine in the copper sector, producing 130,000 tons of copper in 2022. In April 2023, the company launched the technical transformation and upgrading project for Yulong Copper Mine 1 and 2. The technical reform has now been completed. After delivery, the copper production of Yulong Copper Mine is expected to exceed 150,000 tons. At the same time, the company is promoting the Yulong Copper Mine Phase III project. The copper concentrate output is expected to reach 200,000 tons after completion; ② The Western Copper Industry Polymetallic Mineral Processing Technology Improvement Project will begin in 2024. 10,000 tons increased to 1.5 million tons; ③ Shuangli iron ore started rolling Geotechnical engineering, involving harvesting and production capacity of 3.4 million tons. 2) Salt Lake industry chain layout: Relying on the western magnesium industry to form an integrated magnesium picking+processing industrial chain. Currently, Salt Lake Magnesium Extraction Design has an annual output of 500,000 tons; West Mining Company acquired 27% of Dongtai Lithium Resources Company's shares and 6.29% of Taifeng Xianxing's shares in March 2022 and June 2023, respectively, gradually forming a complete industrial chain from salt lake lithium resource development to battery cathode material production.
Stable operating performance, and long-term dividends give back to shareholders. Since 2018, the company's revenue has grown steadily. In 2023, the company achieved operating income of 42,748 billion yuan, a year-on-year increase of 6.24%, and achieved net profit of 2,789 billion yuan, a year-on-year decrease of 18.38%, and the highest operating income in five years. The company has formulated a scientific and stable cash dividend policy to give back to shareholders with a continuous dividend ratio. Since its listing, the company has accumulated cash dividends of 7.149 billion yuan, accounting for 56.16% of the cumulative distributable profit, which is at the top of the industry. In 2023, the company paid a total dividend of 1.19 billion yuan, accounting for 43% of the distributable profits belonging to the parent company.
Profit forecast and investment advice: We expect the company's net profit to be 38.6/46.0/5.33 billion yuan in 2024-2026, respectively, and the corresponding EPS is 1.62/1.93/2.24 yuan/share. Zhongjin Lingnan, Zijin Mining, and Luoyang Molybdenum were selected as comparable companies. Based on the closing price of May 9, 2024, the comparable company predicted an average PE value of 18/16/14 times for 24-25, respectively. Referring to the comparable company, the company was valued 18 times in 2024, corresponding to a target price of 29.14. The first coverage gave the company a “buy” rating.
Risk warning: Metal prices fall short of expectations, project progress falls short of expectations