2023 Production in Line with Guidance
Central Asia Metals (CAML LN) has again achieved production guidance for the full year. Copper production in Q4 2023 was 3.4kt, down 4% YoY and up 2% QoQ resulting in 13.8kt of output in 2023, down 3% YoY and 1% below our estimate. Zinc production in Q4 2023 was 5.4kt, up 3% YoY and 6% QoQ with full year output of 20.3kt down 5% YoY but 3% ahead of our forecast owing to strong grades in the latter part of the year. This was comfortably within the guidance range of 19-21kt which is maintained for 2024F. Lead production of 7kt in Q4 2023 was up 6% YoY and flat QoQ while full year was up 2% YoY to 27.8kt and in line with our estimate. This was within the guidance range of 28-30kt which is maintained for 2024F.
Impact on Earnings Outlook
The net impact of marking to market full year metal production and sales numbers (with copper sales marginally lower than production) with LME average pricing is a 2% reduction in net revenue to US$197m. This drops through to lower EBITDA and net income of US$98m and US$45m. 2024F guidance is flat and our forecasts are within the ranges provided while our commodity price forecasts reflect steadily recovering economic activity in China despite the continuing weak sentiment towards China. China’s industrial production has made steady gains since a low of 1.2% in December 2022 to 6.6% in November 2023 while the outlook for metal markets has tightened somewhat in the past quarter given supply disruption. Consequently, we anticipate 2024F EBITDA of US$106m supporting further strong dividends and given certainty on figures we are increasing our full year dividend forecast to 18p/sh. implying an 11% yield with cash continuing to build.
Recommendation and Target Price
The stock continues to be cheap, in our view, based on the yield and a discount of 31% to the peer group on an EV/EBITDA basis for 2024. Down 27% in 2023, this reflected lower commodity prices and in the higher interest rate environment a more competitive backdrop for investors seeking yield. The stock saw some benefit towards year end with reversal in these macro factors.
We reiterate our Buy recommendation but adjust our target price to 270p which implies 63% upside and 76% total return.