MCC(601618) 海通证券·2024-07-03 10:31Investment Rating - The report maintains an "Outperform" rating for China Metallurgical Group Corporation (MCC) with a target price range of 4.33-4.81 yuan for 2024, based on a P/E ratio of 9-10x [1][2] Core Investment Thesis - MCC is expected to see a turnaround in its performance, driven by a potential revaluation of its mineral resources segment [1] - The company's mineral resources business, particularly in copper, nickel, and cobalt, is a key growth driver, contributing 14% to net profit in 2023 [2] - MCC plans to achieve revenue of 660 billion yuan in 2024, a 4.13% YoY increase, with new contract signings targeted at 1.5 trillion yuan, up 5.28% YoY [2] Financial Performance and Projections - In 2023, MCC reported revenue of 633.87 billion yuan, a 6.95% YoY increase, with a gross margin of 9.69% [18] - Net profit attributable to shareholders was 8.67 billion yuan in 2023, down 15.63% YoY, mainly due to impairment losses of 8.95 billion yuan, an 80.4% YoY increase [2][26] - For 2024-2026, MCC is projected to achieve EPS of 0.48, 0.53, and 0.57 yuan, respectively, with revenue growth of 9.8%, 11.7%, and 8.0% [18][42] Business Segments - MCC's engineering contracting business accounted for 91.63% of total revenue in 2023, with housing construction and municipal infrastructure contributing 73.3% [10] - The mineral resources segment, though only 1.05% of revenue, has a high gross margin of 30.99% and is a key growth driver [10][18] - MCC's overseas revenue grew 14.48% YoY in 2023, with new overseas contracts increasing 43.72% YoY to 63.38 billion yuan [15] Mineral Resources - MCC has significant copper, nickel, and cobalt resources, with 1.393 million tons of copper reserves, 126,000 tons of nickel reserves, and 140,000 tons of cobalt reserves [31][33] - The company's three operating mines contributed 1.214 billion yuan in net profit in 2023, accounting for 14% of total net profit [31] - MCC's undeveloped Aynak copper mine in Afghanistan has 1.108 million tons of copper reserves with an average grade of 1.67%, making it one of the world's largest undeveloped high-grade copper deposits [35] Order Backlog and Growth Prospects - MCC's backlog of engineering contracts over 50 million yuan stood at 2.854 trillion yuan at the end of 2023, approximately 4.5 times its 2023 revenue [38] - The company aims to sign 1.5 trillion yuan in new contracts in 2024, a 5.28% YoY increase, with overseas contracts expected to continue strong growth [12][15] Valuation and Dividends - MCC's P/E ratio is projected to decline from 7.51x in 2023 to 5.49x in 2026, with a dividend yield of 2.35% in 2023, showing a long-term upward trend [37][42] - The company's cash dividend payout ratio increased to 17.21% in 2023, up 0.47 percentage points YoY, with expectations of further increases in the future [37]