Event: the company announced that it plans to expand the project with an annual production capacity of 1.3 million tons of aluminum alloy ingots in Malaysia. According to the announcement of October 23, 2021, YCTL, a wholly owned subsidiary of the company, plans to invest and expand the project with an annual production capacity of 1.3 million tons of aluminum alloy ingots in Danrong Langsai Industrial Zone, Johor, Malaysia. Construction is expected to be divided into two phases, both of which will be 650000 tons of aluminum alloy ingots.
The project has a total investment of 4 billion yuan, corresponding to a production capacity of 1.3 million tons of aluminum alloy ingots and a ton of aluminum investment of 3077 yuan. The consideration of the project investment in similar projects of listed companies is on the low side. And most of the similar projects are small and medium-sized projects of less than 300000 tons, and it is rare to see more than 1 million tons of recycled aluminum projects. This 1.3 million-ton aluminum alloy ingot project may be the largest recycled aluminum project in recent years. After reaching production, the total production capacity of the company in Malaysia will reach 1.5698 million tons, an increase of 482% compared with the original production capacity of 269800 tons.
The sources of project funds include, but are not limited to, the company's own funds, bank loans and other forms of financing.
2021H1, the company's net operating cash flow reached 841 million yuan, accounting for 21% of revenue, and the asset-liability ratio was only 36.4%. It shows that the company has sound operation, low asset-liability ratio, good financial situation, the ability of continuous expansion, and its own funds can cover the construction cost of the project to a large extent.
Core focus: the company's core advantage lies in the comprehensive cost advantages brought by the waste aluminum recycling system at home and abroad (the United States, China, South America, Europe, Australia, Japan, Southeast Asia and other countries and regions) as well as the aluminum alloy production base in Malaysia. After raising the control standard of waste non-ferrous metal entrainment from 2% to 1% in 2018, it was further raised to 0.5% in 2020, and the import of waste aluminum gradually decreased; in addition, after aluminum ash was adjusted to solid waste, the overseas waste aluminum supply system further ensures the company's competitive advantage. Under the background of carbon neutralization and carbon peak, waste aluminum has more advantages in resource saving, energy saving and emission reduction, and meeting the ESG requirements of the automobile industry chain. The large-scale expansion of the Malaysian factory will open up the company's long-term growth space.
Profit forecast: the global layout of the company's scrap aluminum acquisition end, with the advantage of purchasing raw materials at a low price, with the improvement of waste aluminum recycling capacity, the company's capacity utilization of aluminum ingot production has greater room for improvement. This 1.3 million-ton project opens room for long-term growth. It is assumed that the first phase of the project will be put into production in the second half of 23, contributing 300000 tons in that year. The net profit from 2021 to 2023 is adjusted to 967 million yuan, 1.098 billion yuan and 1.678 billion yuan, and the corresponding EPS is 0.44,0.50,0.76 yuan respectively. The PE corresponding to the closing price on October 22 was 11.1x, 9.7x and 6.4x. Maintain the "prudent overweight" rating.
Risk tips: downstream demand is not as expected, project progress is not as expected, capacity utilization is not as expected, etc.
