Main points of investment
The advantages of production capacity and output are obvious, and raising and putting into production can strengthen the company's market share. The company mainly sells recycled aluminum alloy ingots, ranking fourth in domestic output from 2016 to 2019. The company has production bases in Chongqing, Qingyuan, Guangdong and Liyang, Jiangsu. The products are mainly sold to Southwest, South and East China. The production capacity of aluminum alloy ingot reached 402700 tons in 2019.
The upstream supply is sufficient to superimpose the growth of demand in the downstream industry, and the prospect of recycled aluminum is broad. ① upstream supply: the import of waste aluminum is limited, but with the arrival of the peak of scrapping of aluminum products in China, the social retention of waste aluminum in China is expected to grow rapidly; ② industry pattern: the recycled aluminum industry is encouraged and promoted by energy conservation, environmental protection and resource conservation policies, and the industry concentration is low at present. ③ downstream demand: China's automobile market still has growth potential, especially the development of new energy vehicles is expected to inject new power into the automobile market. Under the trend of lightweight, aluminum for bicycles is expected to continue to improve, helping to expand the demand for recycled aluminum ingots. In addition, the fields of communications and consumer electronics are expected to fully benefit from the acceleration of 5G construction, and high demand growth is expected.
Competitive advantage: diversified regional layout and better cost control. The diversification of the company's production area layout is conducive to the expansion of the sales market; the diversification of product sales areas is conducive to the dispersion of market risks in different sales areas. Compared with comparable company Yiqiu resources, the company's sales expense rate and management expense rate are lower, and the change of financial expense rate is more stable.
Expand the production capacity of recycled aluminum and improve the regional layout of central and southern China. The company plans to raise 385 million yuan, all for the construction and operation of the Xiangyang production base in Hubei, which has an annual output of 200000 tons of aluminum alloy ingots, located in central China and Guangdong Province. The construction period is 18 months. After it is completed and put into production, the average annual output of aluminum alloy ingots is expected to increase by 166900 tons, with an estimated annual business income of 1.9822171 billion yuan and a net profit of 73.5273 million yuan. Increase earnings per share by 0.17 yuan.
Profit forecast and rating: it is estimated that the return net profit of the company from 2020 to 2022 is 218 million yuan, 238 million yuan and 283 million yuan respectively, and the EPS is 0.50,0.54,0.64 yuan respectively. Coverage for the first time, giving the company a "prudent overweight" rating.
Risk hints: low downstream demand; sharp drop in aluminum prices; intensified competition in the industry; and lower-than-expected construction progress of fund-raising projects