Events:

According to the company's third quarterly report, the company's operating income in the first three quarters was 777 million yuan, down 0.36% from the same period last year, and its net profit was 76 million, down 6.92% from the same period last year. In the third quarter, the operating income was 255 million yuan, down 12.8% from the same period last year, and the net profit was 18 million yuan, down 34.2% from the same period last year. Slightly lower than expected.

Main points of investment

Aluminum demand is weak, the company's main products aluminum grain refiner demand decline, the company's overall performance decline: due to Sino-US trade frictions and China's own economic cycle, domestic aluminum demand continues to be weak, aluminum production decline, resulting in aluminum grain refiner demand is not as expected, the company as the domestic aluminum grain refiner leader, bear the brunt, revenue dropped significantly in the third quarter compared with the same period last year.

The company is gradually transforming to high-end aluminum-based master alloy, with great potential in the future: in the first half of the year, the company realized the transfer of 30,000 tons / year aluminum grain refiner production line from Shenzhen to Luoyang, and the project has been put into production. Shenzhen plant retains only 30,000 tons / year production capacity of aluminum grain refiner, which is gradually transforming to other high-end alloys, and the company is speeding up the construction of its production line. From the perspective of the demand structure of aluminum, the low-end demand for aluminum continues to be depressed, while the high-end demand continues unabated. The continuous promotion and application of new energy vehicles and the development trend of lightweight vehicles in the future are expected to pull the rebound in aluminum demand. The company's main products have great potential in the future.

Profit forecast and investment advice: we estimate that in 19-21, the company's return net profit is 1.14,1.29,144 million yuan respectively, the EPS is 0.72,0.81,0.90 yuan respectively, and the PE corresponding to the closing price of 26.22yuan is 36.65,32.48,29.08 times, maintaining the "overweight" rating.

Risk factors: the development of the aluminum industry is not as expected, the progress of new projects is not as expected, the price of aluminum raw materials fluctuates, and the demand for high-end aluminum materials is not as expected.