Incident: On the evening of May 16, 2024, the company issued the “Notice Concerning the Production Plan for Major Mineral Products for the Next Five Years (to 2028)” and proposed to strive to achieve the main economic indicators for 2030 (established in January 2023) 2 years (2028) ahead of schedule.
Comment:
The compound growth rate of copper and gold production in 2023-2028 was 9%. The company plans to produce 1.5 to 1.6 million tons of mineral copper in 2028, 100-110 tons of mineral gold, 55-600,000 tons of zinc/lead, 600-700 tons of silver, 25-300,000 tons of lithium (LCE), and 25-35,000 tons of molybdenum; if calculated according to the planned median value, copper, gold, zinc/lead, silver, lithium and molybdenum production will grow at a compound growth rate of 9%, 9%, 4%, 10%, 147%, 30% in 2023-2028.
Production in 2025 was adjusted from the original plan: mineral copper (+50,000 tons), mineral gold (-5 tons), zinc (lead) (+20,000 tons), lithium (20,000 tons). In the 2023 annual report, the company estimates the planned production output of 1.17 million tons of copper, 90 tons of mineral gold, 480,000 tons of zinc (lead), 450 tons of silver, 120,000 tons of lithium carbonate, and 16,000 tons of mineral molybdenum in 2025. According to the company's latest plan, the 2025 mineral copper production plan will be increased by 50,000 tons compared to the above plan; mineral gold will be reduced by 5 tons, mineral zinc (lead) will be increased by 20,000 tons, mineral silver will be increased by 50 tons, lithium will be reduced by 20,000 tons, and mineral molybdenum will be reduced by 60,000 tons.
The company's historical planning output has a high degree of completion. Since 2014, the company has disclosed production plans for major mineral products on an annual basis or in the range of three to five years. Over a ten-year period, the average completion rate of production plans for major mineral products disclosed by the company was 104% copper, 96% gold, 96% zinc (lead), 96% zinc (lead), 97% lithium, 112% silver, 135% molybdenum, and 111% iron; the company is also the only company among the top 10 copper companies in the world that has exceeded the production guidelines for five consecutive years.
I am optimistic that the copper and gold price center will continue to rise. 1) Copper: In the “From the perspective of cost and net present value, copper prices are expected to rise to more than $12,000 per ton — Copper Industry Report Series 5” released on April 18, 2024, it is proposed that the balance between global supply and demand for refined copper in 2024/2025 is -39/- 640,000 tons, with a gap of about 1.4% and 2.2% of global demand. In terms of net present value, copper prices need to rise to 12000-14,000 US dollars/ton to stimulate potential supply growth. 2) Gold: After the US April CPI was announced on the evening of May 15, the market expected interest rate cuts to begin in September; judging from the review history, gold and gold stocks still had excess earnings before interest rate cuts.
Profit forecast, valuation and rating: Considering the recent rise in copper and gold prices, based on the assumption that the 2024-2026 average annual price of Shanghai Copper is 75,000/78,000/78,000 yuan/ton and the average annual price of Shanghai and Gold is 540/550/560 yuan/g, according to the company's latest production plan, the net profit returned to mother for 2024/2025/2026 was increased by 292/351/42.6 billion yuan, respectively (up 7%/5%/6% from the previous forecast), up 38%/20%/21% year on year. The corresponding PE price for the current stock price is 16/14/11 Double, maintaining the “gain” rating for the company.
Risk warning: The decline in copper and gold prices exceeded expectations, construction of copper and gold projects fell short of expectations; overseas operation risks.