The company made a net profit loss of 189 million yuan in 2017.
The company released its annual report for 2017: operating income for the whole year was 11.522 billion yuan, down 17.20% from the same period last year; net profit from home was-189 million yuan, down 247 million yuan from the same period last year; basic earnings per share was 0.11 yuan, down 0.14 yuan from the same period last year; and the weighted average return on net assets was-4.00%, down 5.21 percentage points from the same period last year.
In the fourth quarter of 2017, the operating income was 2.223 billion yuan, down 31.35% from the same period last year and 36.43% from the previous year; the net profit from the home was-327 million yuan, a decrease of 211 million yuan from the same period last year and 400 million yuan from the previous year. Due to the lower than we expected aluminum prices in the fourth quarter of 2017 and the high cost-side raw material prices, the company suffered a substantial loss and its full-year results were lower than we had expected. However, taking into account the expected future rise in aluminum prices and the company's current price-to-book valuation is at a low level, maintain the overweight rating.
The high cost in the fourth quarter is the main cause of the loss, and the production limit in the heating season and the suspension of coal mine production are even worse. According to our electrolytic aluminum cost calculation model, the average complete cost of the whole industry in the fourth quarter of last year was 15969 yuan / ton, and the average loss per ton of electrolytic aluminum was about 800yuan. The industry generally suffered serious losses. In the fourth quarter of last year, the cost-end alumina, pre-baked anode, coal and electricity prices were all the highest in the year, while the company's alumina was completely purchased, the pre-baked anode and power self-sufficiency rate was also low, and the electric power outsourcing cost in Henan was high. The above factors combined with the decline in aluminum prices led to a large loss in the fourth quarter. During the year, the company was also affected by the production limit in the heating season and the suspension of coal mine production in Gongyi City. The output of electrolytic aluminum in the heating season was reduced by 30800 tons than the budget, affecting the profit of 126 million yuan; the company's Dengfeng regional coal mine stopped production from January to November 2017 due to safety accidents, and the annual output was on the low side, resulting in an increase in power generation costs and affecting profits of 150 million yuan.
The added value of the products increased steadily during the year, and the cost and expenses are expected to be reduced. The company has stepped up the environmental protection transformation of the equipment during the heating season, and has carried out an overhaul of the electrolytic cell in advance during the production limit period. at the same time, the energy-saving technical transformation of the outage electrolytic cell has been carried out, and the DC power consumption per ton of electrolytic aluminum can be reduced by more than 500 degrees, which will help to reduce the production cost this year. The aluminum intensive processing project that the company has raised for many years is also expected to gradually reach production from this year, and the increase in the added value of the company's products will help improve its profitability. At present, the company's main products are high-performance aluminum alloy plates, cans, high-grade double zero aluminum foil wool and high-grade printing plate base, etc., and plans to develop automobile plate, ship plate, aviation board and other markets in the future. In addition, in February 2018, the company will raise 1.25 billion more funds to repay the loan, and the company's annual financial expenses are expected to drop by more than 100 million yuan.
From the PB point of view, the company is undervalued, maintaining the "overweight" rating in the supply-side reform so that new aluminum production capacity is under strict control of the environment, the future aluminum price hub may rise moderately.
We assume that the average price of electrolytic aluminum from 2018 to 2020 will reach 1.50,155,1600,000 yuan / ton respectively, then the EPS of the company in 18-20 years will be 0.10,0.13,0.21 yuan respectively. Due to the obvious correction of aluminum prices from last year's peak, we have lowered our expectations for aluminum prices. The company's EPS in 18-19 has been adjusted to-0.29 yuan and-0.44 yuan respectively compared with the previous forecast, and the BVPS in 18 years is expected to be 3.08 yuan. With reference to the industry's average PB valuation level of 1.82 times in 2018, and considering that the company's average PB (LF) in the past 5 years is 1.76 times, while the stock price on April 20 is only 1.33 times PB (LF), we give the company 1.65-1.85 times PB over 18 years, corresponding to the target price of RMB 5.08-5.70. Maintain the overweight rating.
Risk tips: aluminum prices fall; raw material costs rise sharply; the company's high-precision aluminum production is slow and so on.
