Key points of investment:
An industry-leading copper smelter, it is expected to produce 161,700 tons of copper in-house in 24 years. The company is a large-scale copper manufacturer with a full industrial chain integrating copper mining, smelting, processing and trading. It has a leading position in the industry and a significant competitive advantage. At the end of 2023, there were 6.372 million tons of copper resources. In 2023, the company produced 1.7563 million tons of cathode copper, accounting for 13.52% of the total domestic output, and produced 175,500 tons of copper in its own copper concentrate, ranking in the leading position in the country; 414,400 tons of copper processed materials, and the output completion was better than expected.
In 2024, it is estimated that the copper concentrate contains 161,700 tons of copper, 1.73 million tons of cathode copper, and 428,000 tons of processed copper materials.
The overall outlook for the copper industry is improving, and copper prices will remain high. With the gradual recovery of the global economy, the medium- to long-term demand prospects for copper remain optimistic. Demand for industrial applications of copper is expected to be significantly boosted, particularly driven by the energy transition and emerging technology industries. Considering factors such as global economic recovery, energy transformation, and the development of emerging technology industries, the overall future demand for the copper market is expected to improve. As global copper scarcity gradually becomes prominent due to declining copper grades, resource restrictions, geopolitical conflicts, etc., and demand for new energy sources continues to be high, it is expected that copper prices will remain high in the future.
The Mirador copper mine is about to harvest its performance, and copper production has risen sharply. In August 2023, the company acquired the Mirador Copper Mine in Ecuador, the world's largest copper mine under China Railway Jiantongguan. Currently, the amount of ore discovered and controlled is 1,257 million tons, the average grade of copper ore is 0.48%, and the amount of copper metal is 6.0305 million tons. The first phase of the Mirador Copper Mine has reached production with an annual production capacity of 20 million tons of raw ore. The second phase of the project is expected to be completed and put into operation in June 2025. It is estimated that an annual output of 26.2 million tons of raw ore will be added. The new production will account for 56.71% of the total output, and the additional production will account for 47.99% of the value of mining rights, further enhancing the company's reserves of high-quality copper ore resources.
Entering the field of new energy, the copper foil business is developing rapidly. The company is involved in the field of new energy, is a major domestic copper foil manufacturer, and has a deep technical accumulation in the field of copper foil processing. By the end of '23, copper foil production capacity reached 55,000 tons, and copper foil production capacity for lithium batteries under construction was 25,000 tons/year; shipments of high-frequency high-speed copper foil for 5G communications, and lithium foil shipments of 6 microns and below grew rapidly, making it a major supplier to leading companies in the industry; it is expected that in the first half of 2024, copper foil production capacity will reach 80,000 tons, further consolidating and enhancing the leading position in the industry.
Profit forecasting and valuation. We expect that in the next three years, the company will benefit from the gradual commissioning of the Mirador copper mine and usher in a period of rapid net profit growth. The company's EPS for 24-26 is expected to be 0.30, 0.37, and 0.44 yuan/share, respectively. Referring to the valuation level of comparable companies, a PE valuation of 13-15 times 2024 was given, corresponding to a reasonable value range of 3.9-4.5 yuan/share. For the first time, the “superior to the market” rating was given.
Risk warning. Risk of fluctuations in raw material prices; macroeconomics falling short of expectations; downstream demand falling short of expectations.