Main points of investment
Under the supervision of environmental protection, recycled aluminum enterprises stopped production, promoting the price of recycled aluminum alloy ingots higher. From August to 15, 2017, the fourth batch of environmental protection inspection team was stationed. Among the provinces stationed this time, Zhejiang and Shandong are the main industrial bases of recycled aluminum in China. Under the supervision of environmental protection, a large number of local recycled aluminum enterprises have stopped production, resulting in a sharp drop in supply and pushing up the price of recycled aluminum alloy ingots. At present, domestic ADC-12 aluminum alloy ingots are quoted at 15750 yuan, up 8% from the beginning of July. Yiqiu Resources main business is the sale of recycled aluminum alloy ingots, the price rises, the company's performance directly benefits. In the second half of the year, aluminum prices are expected to remain strong and the company's profits are expected to continue to benefit from the supply-side reform of electrolytic aluminum and the policy of limiting production during the heating season.
The performance of the China report has greatly improved and successfully reversed its losses. The company's revenue in the first half of the year was 2.5 billion yuan, + 81% compared with the same period last year, and the net profit attributed to shareholders of listed companies was 179 million yuan, + 1601% over the same period last year. The surge in performance benefited from the following factors:
Aluminum prices rose sharply in the first half of the year, resulting in a substantial increase in net profit from the manufacturing and sales of aluminum ingots in Malaysia (Yiqiu), Hemo and YCTL; 2) Metalico reported good revenue in the first half of 2017, with a net profit of 33.12 million yuan.
The solid waste import policy is expected to be good for recycling leaders. On July 28, 2017, the State Office formally issued the implementation Plan for banning the entry of Foreign waste to promote the Reform of solid waste Import Management system. Combined with the current background of environmental supervision, China's solid waste import is facing a policy inflection point. In addition, a large number of domestic non-compliant solid waste treatment enterprises are facing closure or rectification. Yiqiu Resources, as a leading domestic recycled aluminum enterprise, has a leading technical level and strong business malleability under the situation of stricter environmental protection policy, so it is expected to highlight its own advantages in the future competition. no, no, no.
The steady development of the main business in the second half of the year will maintain our judgment on full-year profits. We judge that the company's annual net profit is 421 million yuan, which is consistent with the company's performance outlook for the main business in the second half of the year. The net profit in the first half of the year is 179 million. In the second half of the year, we mainly focus on the following three points: 1) the implementation of the supply-side reform policy of the domestic electrolytic aluminum industry, superimposed heating season production restrictions and other environmental protection policies, the domestic electrolytic aluminum supply is expected to contract significantly, supporting the strong aluminum price. The company's main business has a high correlation with aluminum prices, and the profit level is expected to maintain a substantial growth trend. 2) it is expected that the import ban on "waste seven categories" will be gradually implemented, the import price of domestic waste aluminum will rise, and the company's raw material cost advantage will be further strengthened. 3) benefiting from the warming of the scrap metal recycling market in the United States, the revenue and profit level of the subsidiary Metalico improved significantly, the company completed the vertical integration of the industrial chain, and the profits extended upstream.
Risk tips: changes in scrap import and export policy; drop in aluminum prices; new production of subsidiaries and transformation projects are not as expected.
Profit forecast and valuation. Still optimistic about Yiqiu resources, maintain the company's 2017-2019EPS forecast of 0.21, 0.32, 0.44 yuan. Considering the forecast valuation of the company's aluminum ingot sales business in 2017 and the upward trend of aluminum prices, the company is valued at 6.1x PB, with a target price of 6.9yuan per share, maintaining a "buy" rating.
