Yunnan Copper (000878): Accelerate the elimination of low-margin trading business and increase production capacity to help future growth
Event: The company released its 2018 annual report.
At the core of the report, the company achieved revenue of 474.
300,000 yuan, down 16.
80%; net profit attributable to mothers1.
2.5 billion, down 46.
04%; EPS after dilution is 0.
073 yuan / share.
The company also announced its 2019 production plan, which is expected to achieve 106 positions in electrolytic copper production in 19 years, and gold 8.
5 tons, 600 tons of silver.
It is estimated that the revenue will be 596 million.
Both the volume and price of smelted copper rose, and the trading copper business decreased significantly.
In 2018, the company achieved a copper metal content of 8 produced by the mine itself.
10 for the first time, growing 46 per year.
63%, resource self-sufficiency has improved.
The output of electrolytic copper reached a new high, reaching 68.
In terms of copper prices, the average LME copper price in 2018 was 6523 US dollars / ton, which has increased by 5 in the past.
8%, rising volume and price will help the company’s copper smelting business to improve.
The decrease in the company’s revenue was mainly due to the company’s accelerated elimination of low-level, low-margin trade copper business. The report summarized the company’s optimization of the structure, the transfer of trading companies such as Beijing Yuntong, Shanghai Yuntong, etc., and the sales of electric copper decreased.
Correspondingly, the company’s gross profit margin increased by 3.
77pct, reaching 7.
西安耍耍网 Expenses and impairment of assets increased, dragging down the company’s performance.
In 2018, affected by employee compensation and the loss of suspension of subsidiaries, the company’s management expenses also increased by 49.
67%, up to 9.
45 ppm; financial expenses also increased by 61 due to exchange loss losses and increased interest expenses.
74%, up to 8.
At the same time, due to the temporary suspension of production at the Haojiahe Copper Mine, an impairment loss on assets was accrued5.
Acquired Diqing Nonferrous Metals and increased its copper ore production capacity.
In December 2018, the company completed the fixed increase, which is planned to be 14.
Acquired Diqing Nonferrous Metals for $ 3.9 billion.
Diqing Nonferrous Mining’s main copper ore mining has obtained the mining rights of Prang and mining rights outside Prang, with a total of 27951 ore reserves (111b, 122b, 333).
13 cobalt, copper-containing metal 143.
76 Cobalt and copper average grade 0.
51%, the design capacity is 1250 / year of raw ore, and the annual output of copper-containing copper metal is about 6 based on the average grade.
4 Initially, equity output is about 3.
2 The maximum limit, the project is expected to reach production in 2020, when the company’s mining copper capacity will be substantially increased.
In addition, the Yunnan Copper Group promises that the total profit of Diqing Nonferrous from 2018 to 2020 will be 8.
1.7 billion, the corresponding annual deduction of non-attribution net profit is 1.
5.2 billion, 2.
8.2 billion and 3.
In 2018, Diqing Nonferrous Metals achieved performance2.
7.5 billion, realizing performance commitments for the year.
The 40 annual / annual production capacity of Southeast Copper Smelting Base has significantly improved the company’s smelting capacity.
The 40-point alkyl copper project at the Southeast Copper Smelting Base invested by the company was formally ignited and commissioned in July. The project is currently in trial production and has not yet reached production.
After the completion of the expansion of Chifeng Yuntong Copper, the company’s smelting scale will reach 120 inches (40 inches in the southwest + 40 destinations after the expansion of Chifeng + 40 substitution in the southeast).
The trade war situation has eased, and the supply-demand relationship may drive copper prices back up.
In the second half of 2018, copper prices showed a downward trend due to the impact of Sino-US trade frictions and the macroeconomic downturn.
Recently, the trade war has eased and the supply side is currently relatively tight. According to ICSG, the long-term copper market supply in 2018 decreased by 38.
7 For the first time, we expect copper prices to gradually rise.
Earnings forecast and rating: Affected by the sharp reduction of the trading business, the net profit will be returned to 6 from 2019 to 2020.
900 million / 12.
800 million down to 2.
6.1 billion / 7.
4.3 billion, the corresponding EPS is 0.
44 yuan / share, dynamic PE is 73/26/19 times, maintaining the “overweight” level.
Risk Warning: Copper prices fall risk, the company’s capacity is not as large as expected