Supply reform & environmental protection production restrictions continue to advance, and the price of electrolytic aluminum is expected to continue to rise.
Supply-side reform is the strategic policy of the country's long-term development, and capacity removal is only the first step, followed by the shutdown of illegal production capacity and the implementation of environmental protection production restrictions in the heating season, so that the electrolytic aluminum industry can achieve clear capacity, capacity decline, inventory return to a reasonable level, the situation of oversupply in the industry has been reversed, corporate profits have continued to improve, and finally the asset-liability ratio has been reduced to the normal level. The industry can develop smoothly, healthily and orderly. At present, the asset-liability ratio of major electrolytic aluminum enterprises is still high, illegal production capacity is gradually shut down, there is still much room for improvement, during this period, electrolytic aluminum prices are expected to continue to rise.
The supply of waste aluminum in the upstream has greatly increased, but the smelting capacity has shrunk and the profit of the waste aluminum industry has improved.
The average scrap cycle of aluminum products is 15-18 years, while the substantial growth of aluminum consumption in China started in 2003. With the advent of the scrap period and the expansion of the base, it is expected that from 2017, the supply of waste aluminum will increase from about 10% to 15%. Due to the late start and non-standard development of waste aluminum smelting, there are many small, chaotic and scattered smelters. Although China has successively promulgated industry access standards and increased concentration, 57% of the production capacity still belongs to illegal production capacity. With the promotion of environmental supervision and inspection, illegal production capacity will be accelerated, industry supply and demand will be transferred from the seller's market to the buyer's market, and the profits of the waste aluminum industry will be improved.
Yiqiu Resources: recycled aluminum has high performance flexibility, enjoying hundreds of billions of market disassembly of cars and seven types of policy dividends.
The company has two recycled aluminum alloy ingot production bases with a total production capacity of about 650000 tons in Jiangsu Taicang (380000 tons) and Malaysia (270000 tons), fully benefiting from the profit improvement of the waste aluminum industry, considering that the utilization rate of the company's existing capacity is less than 50%. With the improvement of capacity utilization, performance elasticity is worth looking forward to.
In 2016, the company completed the acquisition of Metalico of the United States, becoming the first global integrated enterprise of recycling, treatment and utilization of recycled aluminum, which not only optimizes the business model, ensures raw materials, but also obtains 100% profit in the industrial chain. Metalico Company 2017H1 net profit of 33.12 million yuan to achieve a turnaround, thickening the company's performance. The automobile scrapping period is usually 10-15 years. China is about to enter the peak period of automobile scrapping. It is predicted that the market space of the scrapped automobile industry will be about 35 billion yuan by 2020. Metalico has relatively mature automobile recycling, disassembly and deep processing technology. In the future, with the financial strength of Yiqiu Resources, the mature automobile recycling, disassembly and deep processing mode of Metalico will be introduced to the Chinese market at an appropriate time, actively participate in the integration of China's scrapped automobile recycling and disassembly market, and build a domestic renewable resources recovery network, which is expected to become a new performance growth point of the company.
Seven types of waste aluminum belong to the list of foreign waste banned by the government this time. My non-ferrous network estimates that waste seven types of waste aluminum accounts for about 40-50% of the total waste aluminum, equivalent to about 1 million tons. Once implemented, it will lead to lower overseas waste aluminum prices and higher domestic waste aluminum and aluminum ingot prices. As a company with the qualification of recycling and dismantling in the United States, the company will enjoy the advantages of overseas low-cost scrap aluminum and high-priced domestic products, and the company will enjoy the dividend of seven types of prohibition policies.
Profit forecast and rating:
We forecast that the company's net profit from 2017 to 2019 will be 467 million, 606 million and 705 million respectively, and the EPS will be 0.23, 0.30 and 0.35 yuan, respectively, and the corresponding PE will be as much as 22-17-14. Relative to aluminum price performance flexibility is high, valuation is low, and will enjoy overseas scrap aluminum import ban, maintain the "buy" rating.
Risk hints: aluminum prices have fallen sharply, car dismantling, scrap aluminum and other national policy changes
