The Zhitong Finance App learned that Guolian Securities released a research report saying that many factors suppressing metal prices in 2024 are expected to be mitigated, and the pace of global economic recovery in the post-pandemic era may become the core of non-ferrous metal pricing. As the Federal Reserve's interest rate hike comes to an end, the US dollar index falls significantly, and global liquidity is expected to improve, compounding expectations for China's economic recovery; continue to be optimistic about investment opportunities in the non-ferrous metals sector and maintain the industry's “better than the big market” rating. We recommend Luoyang Molybdenum (603993.SH), Zijin Mining (601899.SH), and Gold Chengxin (603979.SH), which are expected to increase copper production in 2024; China Aluminum (), China Hongqiao (01378), which are leaders in the electrolytic aluminum industry that are expected to continue to optimize profits, and Chifeng Gold (USD) and China Gold () in the gold sector. 601600.SH 600988.SH 600489.SH

The main views of Guolian Securities are as follows:

The non-ferrous metals sector has had the highest gains since 2023

As of 2024/4/30, the Shenwan Nonferrous Metals Industry Index has risen 1.49% since the beginning of 2023, outperforming the Shanghai and Shenzhen 300 Index by 8.39 pcts, ranking 9th among the 31 Shenwan Tier 1 Industry Indices. In terms of sub-sectors, the precious metals and industrial metals sectors had the highest gains, rising 38.31%/32.93% respectively from the beginning of 2023; the energy metals and new metal materials sectors had the highest declines, falling 44.60%/18.88% respectively from the beginning of 2023.

The performance of the non-ferrous metals sector declined year-on-year in 2023 and 2024Q1

In 2023, the non-ferrous metals sector achieved operating income of 3295.4 billion yuan, an increase of 1.23% year on year; net profit to mother was 133.5 billion yuan, down 29.42% year on year. The 2024Q1 sector achieved total revenue of 781.1 billion yuan, a year-on-year decrease of 3.67%; net profit to mother was 25.754 billion yuan, a year-on-year decrease of 30.99%. In terms of profitability, the gross sales margin/net margin of the non-ferrous metals sector in 2023 was 10.73%/5.34%, respectively, down 1.69/1.49pct year on year; the 2024Q1 segment sales gross margin/net margin was 10.08%/4.49%, respectively, down 0.73/1.16 pct year on year, respectively.

Industrial metals: copper and aluminum prices rose, 2024Q1 performance strengthened

In 2023, the industrial metals sector achieved net profit of 83.8878 billion yuan, up 2.81% year on year; in 2024Q1, net profit attributable to mother was 23.228 billion yuan, up 23.06% year on year. The average price of copper in Shanghai for the full year of 2023 was 68,000 yuan/ton, up 1.72% year on year. In 2024, the copper supply side will continue to fluctuate, and the copper supply and demand gap may widen, supporting the continuous upward movement of copper prices, which is expected to increase the profits of copper mining companies. The average price of aluminum in Shanghai for the full year of 2023 was 18,600 yuan/ton, a year-on-year decrease of 6.47%. The price of aluminum increased in 2024Q1 compared to the same period, while the weakening cost side brought about a marked improvement in the profits of aluminum companies.

Precious Metals: Benefiting from the rise in gold prices, a sharp increase in performance

In 2023, the precious metals sector achieved net profit of 8.215 billion yuan, an increase of 31.00% year on year; in 2024Q1, net profit attributable to mother was 2,566 billion yuan, an increase of 62.31% year on year. In 2024, as inflationary pressure gradually eases, developed overseas economies represented by the Federal Reserve may be expected to begin a cycle of interest rate cuts. Abundant liquidity will benefit gold. At the same time, rising global geopolitical risks, intensifying power games, and major central banks continuing to increase their holdings of gold reserves, etc., are all expected to push the gold price center further upward. Gold sector companies will benefit from stronger gold prices, and profit levels have improved markedly.

Energy Metals: Entering a downward cycle, sector performance is under pressure

In 2023, the energy metals sector achieved net profit of 25.931 billion yuan, a year-on-year decrease of 67.82%. Net profit attributable to mother was 2.117 billion yuan in 2024Q1, a year-on-year decrease of 116.88%. The gross sales margin of the energy metals sector in 2023 was 29.60%, down 14.06 pcts year on year; in 2024Q1, the gross sales margin was 15.73%, down 21.14 pct year on year. Since 2023, energy metals such as lithium and cobalt have continued to be released on the supply side, and the new energy industry chain has entered the storage cycle, leading to a slowdown in demand growth. Energy metals such as lithium and cobalt have entered a downward cycle, and the performance of individual stocks in the energy metals sector has generally been under pressure.

Risk warning: macroeconomic environmental risks; downstream demand for non-ferrous metals falls short of expectations; supply chain risks.