Investment logic
Simultaneous layout at home and abroad, and the production capacity of photovoltaic aluminum profiles continues to expand. With the expansion of the company's production capacity, the company's product sales volume continued to increase from 33,000 tons in 2017 to 176,000 tons in 2022, with a compound growth rate of 39.6%. In '22, the company's industrial aluminum profiles and aluminum parts accounted for more than 90% of revenue. The company plans to invest in the construction of production bases in Vietnam and Malaysia, which will help enhance global competitiveness. It is currently processing preliminary preparations such as ODI overseas investment records.
The company already has a production capacity of 300,000 tons of aluminum products. With the gradual construction and commissioning of the company's overseas aluminum frame projects, we expect the company's aluminum product shipments to be 31.5/42/550 thousand tons in 23-25, respectively.
Demand for photovoltaic modules is increasing, and frame concentration is expected to increase. As the world moves towards parity in photovoltaic storage and the release of silicon materials drives industrial costs downward, it is expected that global PV installations will usher in rapid growth. Referring to Guojin Electric's forecast of new global PV installations, we expect global demand for aluminum frames to increase from 1.58 million tons in 2022 to 3.42 million tons in 2025, with a compound growth rate of 29%. In '22, the global PV aluminum frame CR4 was about 40%, and there are still many small and medium-sized enterprises in the industry. Considering that there are capital, certification and equipment barriers in the industry, it is expected that market share will continue to be concentrated in leading companies represented by companies.
Recycled aluminum cost reduction+product structure optimization drive up profitability. The company has entered the field of recycled aluminum. Recycled aluminum costs less than primary aluminum and can save some small metal costs. The company currently has a recycled aluminum production capacity of 50,000 tons. In May 23, the company plans to privately issue 1,345 million yuan for the 600,000 ton recycled aluminum project. It is divided into three phases and put into operation at the end of 23-25. Currently, the project has been accepted by the Shenzhen Stock Exchange. As the company's self-sufficiency rate of recycled aluminum continues to increase and the scale effect of the company is further developed, the cost of raw materials will continue to drop.
Cut into lightweight automobiles and create a second growth pole. The company's NEV aluminum component project with an annual output of 100,000 tons is being constructed in two phases. The first phase of the project has a production capacity of about 50,000 tons. It is expected that mass production will be achieved in June '23. Construction of the second phase of the project will begin in the second half of the year, and is expected to be put into operation in the fourth quarter. The gross margin of lightweight automotive products is superior to the company's current aluminum frame, and the commissioning of the new project will lead to optimization of the company's product structure.
Profit forecasts, valuations, and ratings
The company's revenue for 23-25 is estimated to be 73/100/13.4 billion yuan respectively, the estimated net profit to be realized is 335/4.31/546 million yuan, EPS is 2.27/2.92/3.70 yuan respectively, and the corresponding PE is 14.94/11.61/9.16 times, respectively. Referring to the PV auxiliary materials industry, it is comparable to the company's PE valuation in 23 years. Considering the company's leading position and future growth potential for photovoltaic aluminum frames in China, the target price was 45.36 yuan in 23 years. The target price was 45.36 yuan, covered for the first time, and given a “buy” rating.
Risk warning
PV installations fell short of expectations, industry competition intensified, project construction progress fell short of expectations, and new technology was replaced.