Sitting on the "coal-electricity-aluminum-aluminum" industry chain, the layout for many years has gradually entered the harvest period
The company has 750000 tons of electrolytic aluminum compliance production capacity, 800000 tons of aluminum processing capacity, 2.1 million tons of coal capacity, 180000 tons of carbon capacity and 900MW self-provided electrical installation capacity. Driven by the recovery of downstream demand and supply-side reform policies, the coal and aluminum industries have ushered in an inflection point in the industry, and the company has fully benefited. In addition, the aluminum intensive processing project that the company has raised and invested for many years is gradually reaching production, while with the improvement of operating cash flow brought about by the improvement of profits, the weakening of capital expenditure and the promotion of raising funds by 1.25 billion, the company's asset-liability ratio and financial expenses are expected to decline gradually. driven by many factors, we believe that the company will usher in the inflection point of operation and performance, and the layout of the industrial chain for many years is gradually entering the harvest period.
Benefiting from aluminum supply-side reform, the elasticity of electrolytic aluminum should not be underestimated.
Electrolytic aluminum and aluminum material business is the company's core business, accounting for about 86.8% of gross profit in 2016. The company currently has a compliance production capacity of 750000 tons and an annual production capacity of about 700000 tons of electrolytic aluminum. Due to less than 400000 tons of rights and interests, the market generally believes that the company's electrolytic aluminum business is not flexible, but we think it is necessary to consider the company's electrolytic aluminum elasticity in combination with aluminum business. The company has 800000 tons of aluminum processing capacity (775500 tons of rights and interests), raw materials are from self-produced electrolytic aluminum, electrolytic aluminum price elasticity or carried forward to the aluminum end to reflect, the real contribution to elastic production capacity is not only the apparent equity. Taking into account the reduction in production in the heating season, even under a more cautious assumption, according to the annual production of 500000 tons of electrolytic aluminum, the electrolytic aluminum will increase by 1000 yuan, and the company's net profit will increase by about 340 million yuan.
The profit space of coal power business is expected to expand.
At present, the company has a coal production capacity of about 2.1 million tons / year, but the capacity utilization rate over the years is not too high, especially in 2015, due to the serious drop in coal prices, the company successively suspended the production of some high-cost coal mines, resulting in an annual output of only 662000 tons. However, since 2016, coal prices have rebounded, and the company has begun to restart production in some coal mines one after another. in 2016, the company's coal production totaled 923800 tons, an increase of 39.55 percent over the same period last year. Under the strict control of production capacity, it is expected that coal prices will tend to be stable in the future. According to the current coal price level, the company's net profit per ton of coal is between 50 and 100 yuan, and the profit situation is better.
The negative cycle of operation is expected to be broken, and the asset-liability ratio and financial expenses may continue to decline.
By the end of June 2017, the asset-liability ratio of the company was about 77%, and the financial expenses paid in half a year reached 414 million yuan. Large financial expenses were an important reason for dragging down the company's past performance, which was superimposed on the poor performance of the company's main business 16 years ago. the net cash inflow contributed by the operating side tightened and the operation fell into a negative cycle.
However, over the past 16 years, with the recovery of electrolytic aluminum prices, the company's profits have improved obviously, and the net inflow of operating cash flow has also rebounded. In addition, the company's 1.25 billion fixed increase project has been approved by the CSRC, and the cash flow will be greatly improved in the future. Asset-liability ratio and financial expenses are expected to continue to decline.
Coverage for the first time, giving "overweight" rating
It is estimated that the company will achieve a net profit of 3.39,6.80 and 1 billion yuan in 1719. The corresponding EPS is 0.19,0.39 and 0.57 yuan respectively. Comprehensive comparable companies will be given 2018 21-23 times PE, corresponding to the target price range of 8.19-8.97 yuan, given the "overweight" rating.
Risk hints: the supply-side reform of the aluminum industry is not up to expectations; the promotion of high-precision aluminum projects is not up to expectations, and coal prices are falling more than expected.