The company has rich reserves of tin and indium resources, and the two leading industries of tin and indium have formed an industrial pattern of exploration, mining, beneficiation, smelting and deep processing of tin, copper, zinc, indium and other metal ores. The products are widely used in aerospace, 5G communications, photovoltaic cells, semiconductor chips and other fields. The company has rich resources, the most complete industrial chain and complete categories in the tin industry, and is the largest tin production and processing base in China. Since 2005, the company has ranked first in the world in terms of tin production and sales, ranking first among the top ten fine tin producers in 2023. At the same time, the company's Dulong mining area has rich reserves of indium resources. It has the highest reserves of indium resources in the world, and is the largest native indium production base in the country. The company achieved revenue of 42.359 billion yuan in 2023, a year-on-year decrease of 18.54%; realized net profit to mother of 1,408 billion yuan, an increase of 4.61% over the previous year. 2024Q1's revenue was 8.399 billion yuan, down 24.47% year on year, and net profit to mother was 326 million yuan, up 22.09% year on year.
Tin-based tin chemical products affected revenue. In terms of tin ingot production revenue reached a new high level of resource reserves, the company's mining units invested a total of 84.9 million yuan in exploration expenses in 2023, adding 14,000 tons of tin resources and 27,000 tons of copper throughout the year. By the end of 2023, the company had 646,400 tons of tin, 1,167,200 tons of copper, 3.7628 million tons of zinc, 4,945 tons of indium, 77,500 tons of tungsten trioxide, 95,400 tons of lead, and 2,491 tons of silver. In terms of production capacity, the company has a tin smelting capacity of 80,000 tons/year, cathode copper production capacity of 125,000 tons/year, zinc smelting capacity of 100,000 tons/year, die-cast zinc alloy 30,000 tons/year, and indium smelting capacity of 60 tons/year. The participating New Materials Company has a tin production capacity of 43,000 tons/year and tin chemical production capacity of 271,000 tons/year. By product, tin ingot output in 2023 was 65,700 tons (+42.61% YoY), accounting for 25.92% of total revenue; copper product output was 129,300 tons (+2.74% YoY), achieving revenue of 7.845 billion yuan, accounting for 18.52% of total revenue; zinc products produced 135,800 tons (-0.43% YoY), achieving revenue of 2,587 billion yuan, accounting for 6.11% of total revenue; other products achieved revenue of 2.504 billion yuan, accounting for 5.91% of total revenue; the supply chain business achieved revenue of 5.91% of total revenue $15.492 billion, accounting for 36.57% of total revenue. Affected by reports from new materials companies and tin chemical companies, the production of tin materials and tin chemical products was drastically reduced. The output of tin materials was 11,200 tons (-57.84% year over year), achieving revenue of 2.118 billion yuan, accounting for 5.00% of total revenue; tin chemical production was 6593 tons (-69.67% year over year), which achieved revenue of 688 million yuan, accounting for 1.62% of total revenue. The company's 2024 budget revenue is 40.3 billion yuan, and the total production of non-ferrous metals is 348,600 tons, including 85,000 tons of tin, 130,000 tons of copper, 131,600 tons of zinc, and 77.81 tons of indium ingots.
Global tin ore supply elasticity is low, and the upgrading of emerging industries helped tin consumption grow on the price side. In 2023, tin metal prices maintained a volatile trend. The main contract price fluctuated somewhat from 2022. The average price of the main contract price of SHFE tin futures was 21,800 yuan/ton, down 13.51% from the average price in 2022. On the supply side, the long-term growth of global tin resource reserves is limited, tin smelting and processing costs have remained low throughout the year, compounded by the fact that the industry's capital expenditure has been insufficient for a long time, and global tin supply elasticity is low. In 2023, global fine tin production was 372,200 tons, a decrease of 2.7% over the previous year. On the demand side, refined tin consumption in developed countries has declined, and domestic tin consumption scenarios in emerging industries such as photovoltaics and new energy vehicles continued to grow at a high rate. In 2023, global consumption of fine tin was 364,400 tons, a decrease of 2.9% over the previous year. According to the company's production and sales volume and industry data, in 2023, the company's tin metal domestic market share was 47.92%, and the global market share was 22.92%. It is expected that as the semiconductor cycle gradually stabilizes and improves, demand for solder is expected to continue to recover, electronic terminal products will continue to develop in the direction of higher computing power and greater intelligence, and the role of tin metal as an “electronic glue” will continue to be highlighted, which is expected to create new growth highlights.
The capital increase accelerates the integration of the tin industry chain. The company benefited from the achievements of the deep processing industry. In April 2023, Tin Industry Co., Ltd. and Yunxi Holdings jointly increased the capital and shares of the former wholly-owned subsidiary Yunnan Tin Industry New Materials Co., Ltd. (“New Material Company”). After the capital increase, Tin Industry Co., Ltd. held 49% of the shares in the new materials company, and Yunxi Holdings became the controlling shareholder of the new materials company. The introduction of Yunxi Holdings will further strengthen the allocation of resource elements. In particular, the injection of large amounts of cash and R&D assets will speed up research on core key materials technology and continuously enhance the core competitiveness and profitability of the tin deep processing sector. As an important participant, the company will benefit from the continuous development and growth of the tin deep processing industry in the future and share the development results.
2024Q1's profitability improved markedly. In terms of R&D investment steadily increasing profitability, the company's gross margin in 2023 was 9.15% (-0.47pct year on year); the net margin was 3.60% (+0.58pct year on year). In the first quarter of 2024, the company's gross margin was 11.20% (+3.53 pct year over year); net margin was 4.13% (+1.65 pct year over year). In terms of period expenses, the company's sales expenses rate in 2023 was 0.19% (year-on-year +0.02pct), financial expenses ratio was 1.03% (year-on-year -0.02pct), and management expenses rate was 2.45% (+0.24pct year over year). The company's R&D expenses in 2020-2023 were 140 million yuan, 204 million yuan, 219 million yuan and 245 million yuan respectively, with R&D expenditure rates of 0.31%, 0.38%, 0.42% and 0.58% respectively. The company has developed a large number of beneficiation equipment and core technologies and processes with independent intellectual property rights. The recycling rate for tin beneficiation is world-leading. In 2023, the company won 2 first prizes of the Yunnan Science and Technology Progress Award, 2 first prizes of the China Nonferrous Metals Industry Science and Technology Awards, and 60 patents were granted.
Investment advice and profit forecasting
With the rapid development of the global NEV, photovoltaic power generation, and artificial intelligence industries, demand for solders is expected to continue to recover, and the role of tin metal as an “electronic glue” will continue to be prominent, which is expected to create new growth highlights. We expect that in 2024-2026, the company's net profit will be 20.69, 23.00, and 2,610 billion yuan, respectively. According to the latest share capital estimates, the corresponding basic earnings per share are 1.26, 1.40, and 1.59 yuan/share, respectively. According to the latest stock price estimates, the corresponding PE valuations will be 12.24, 11.01, and 9.71 times, respectively, giving the company an “increase in holdings” investment rating.
Risk warning
Industrial policy change risk, market price fluctuation risk, supply chain risk, safety and environmental risk.