Brief comment
Global recycled aluminum bibcock, benefiting from carbon neutralization policy dividend
The company is a global recycled aluminum leader, through the global procurement of all kinds of waste aluminum resources, through Suzhou Taicang and Malaysia two production bases for sorting, processing, smelting and other processes to produce recycled aluminum alloy products, mainly sold to China, Japan and Southeast Asia. The company has a capacity of 640000 tons of recycled aluminum, of which, 1) Suzhou Taicang production base has a production capacity of 374000 tons; 2) the production base of Malaysia Yiqiu Company has an original production capacity of 51000 tons; and 3) Malaysia Yiqiu Co., Ltd., has a production capacity of 218800 tons of recycled aluminum alloy ingots.
The acquisition of Metalico in 2018 and the Gillard treatment plant in Ohio in 2020 will disassemble production capacity upstream, continuously extend the recycled metal industry chain and ensure the supply of renewable resources, and it is expected that the utilization rate of recycled aluminum capacity of the company will continue to rise in the future.
The global output of recycled aluminum accounts for about 26% of the aluminum supply. compared with the original aluminum production, the production of recycled aluminum products has the characteristics of low energy consumption and less environmental pollution. According to the company's prospectus, the company uses 117.9 cubic meters of gas per ton of recycled aluminum, 5.1kg of fuel oil and 72.5kWh of electricity per ton. According to the carbon dioxide emission coefficient related to the carbon emissions trading network, the carbon emission per ton of recycled aluminum produced by the company is 0.33 tons (much lower than 12 tons of raw aluminum). China's 14th five-year Plan puts forward "carbon neutralization and carbon peak" as the main target of the national battle for pollution prevention and control, and the recycled aluminum industry is in line with the development direction of a new industry actively advocated and encouraged by the country. The company's main products are various types of aluminum alloy ingots, which are important basic materials necessary for national economic construction and the production of consumer goods. As China and other countries around the world attach importance to the issue of carbon neutralization, electrolytic aluminum production as a high energy-consuming field capacity expansion is limited, it is expected that there will be a shortage of raw aluminum supply in the future, recycled aluminum will become an important supplement to the global aluminum supply.
Aluminum alloy ingot business: benefiting from carbon neutralization policy, capacity release, quantity and price rise the company's aluminum alloy ingot business through global procurement of various waste aluminum resources, after sorting, processing, smelting and other processes at two production bases in Suzhou and Malaysia, recycled aluminum alloy products are mainly sold to China, Japan and Southeast Asia. The company's operating income of aluminum alloy ingots was 3.85 billion yuan (89%) in 2014 and decreased to 3.7 billion yuan (66%) in 2010. the average annual compound growth rate was-1%. The gross profit of aluminum alloy ingots was 200 million yuan (accounting for 99%) in 2014 and increased to 710 million yuan (78%) in 2020, with an average annual compound growth rate of 23%.
The company plans to produce 918000 tons of aluminum alloy ingots, including 644000 tons of aluminum alloy ingots in production and 273600 tons of aluminum alloy ingots in the plan.
In the production capacity, 1) the production capacity of Suzhou Taicang production base is 374000 tons; 2) the original production capacity of the production base of Malaysia Yiqiu Company is 51000 tons; and 3) the expansion project of recycled aluminum alloy ingots of Malaysia Yiqiu Company has a production capacity of 218800 tons. The project was put into production at the end of 2015, mainly to meet the needs of Southeast Asia. The planned production capacity is 273600 tons, and the production capacity of the fund-raising project "remote expansion of waste aluminum recycling cast aluminum alloy ingots" is 273600 tons. The project was postponed after consideration in 2012, and there is no specific production time for the time being.
Profitability has improved steadily, with gross profit margin rising to 19% in 2020, and future growth in volume and price will drive performance growth. The output of aluminum alloy ingots reached 293000 tons in 2014 and increased to 311000 tons in 2020, with an average annual compound growth rate of 1%. The sales volume of aluminum alloy ingots reached 290000 tons in 2014 and increased to 325000 tons in 2020, with an average annual compound growth rate of 2%. In 2020, the utilization rate of aluminum alloy ingot capacity of the company is 48%, and the production and marketing rate is 104%. The selling price of aluminum alloy ingots was 13,000 yuan / ton in 2014, falling to 11,000 yuan / ton in 2020, with an average annual compound growth rate of-3%. Gross profit of aluminum alloy ingots was 702 yuan / ton in 2014 and increased to 2178 yuan / ton in 2020, with an average annual compound growth rate of 21%.
Scrap trading business: the acquisition of Metalico company to obtain upstream profits, asset turnover and profitability greatly improve the company's scrap trading business through the recovery of various industrial and household scrap, the use of equipment to separate metal and other recyclable waste, the products are an important source of raw materials for the downstream metal industry, the company has more than 20 waste processing plants, radiating most of the eastern United States It is one of the top 20 metal recycling enterprises in the United States, with customers radiating from the United States, China, Southeast Asia, India and other countries. The profit of waste trade business has grown rapidly in recent years. The company's operating income from waste trade increased from 720 million yuan (19%) in 2016 to 1.48 billion yuan (26%) in 2020. The average annual compound growth rate was 20%. The gross profit of waste trade in 2016 was 40 million yuan (14%), and increased to 140 million yuan (16%) in 2020, with an average annual compound growth rate of 35%.
After the acquisition of Metalico in 2016, the company's business extended upward into the US scrap metal recycling market, making profits in the upper reaches of the industrial chain, reducing the loss of intermediate links, and greatly improving asset turnover and overall profitability. The company's waste trade business output increased from 215000 tons in 2016 to 514000 tons in 2020, with an average annual compound growth rate of 24%. The sales volume of waste trade business increased from 219000 tons in 2016 to 495000 tons in 2020, with an average annual compound growth rate of 23%. The price of the company's waste trade ton was 3292 yuan / ton in 2016, and dropped to 2982 yuan / ton in 2020, with an average annual compound growth rate of-2%. The gross profit of the company's waste trade ton in 2016 increased to 292 yuan / ton in 2020, with an average annual compound growth rate of 10%. It is expected that the waste trade business will maintain steady growth in the future.
Leftover material business: the increase of ton selling price drives the profit growth of leftover material.
The company's leftover material business is reproduced and sold through the recycling of leftovers from the waste plant. The company's operating income was 160 million yuan (4%) in 2016 and increased to 450 million yuan (8%) in 2020, with an average annual compound growth rate of 29%. The company's operating margin was-4.75 million yuan (- 2%) in 2016, and increased to 52.14 million yuan (6%) in 2020, with an average annual compound growth rate of 82%. The company's leftover material business output increased from 44000 tons in 2016 to 58000 tons in 2020, with an average annual compound growth rate of 7%. The company's leftover business sales volume decreased to 51000 tons in 2016, with an average annual compound growth rate of-5%. In 2018-2020, the selling price of leftover material is 3869 yuan, 7488 yuan and 8784 yuan / ton respectively, and the gross profit of scrap ton in 2018-2020 is 251,339 and 1018 yuan / ton, respectively. It is expected that with the rise of aluminum prices in the future, the gross profit of the company's leftover material business will continue to rise.
Investment suggestion
It is estimated that the return net profit of the company from 2021 to 2023 is 8.3,10.7 and 1.39 billion yuan respectively, and the corresponding share price PE is 10.9,8.5 and 6.6 times respectively. Taking into account the company's industry status and future growth, the company is covered for the first time and gives the company a "buy" rating.
Risk analysis
Repeated outbreaks have led to reduced risks in the import of recycled aluminum raw materials, tighter liquidity, falling risks in aluminum prices, and risks in overseas projects affected by local environmental policies.
