1H23 performance is in line with our expectations
The company announced 1H23 results: 1H23 achieved operating income of 2.82 billion yuan, year-on-year + 37.6%; return to the mother net profit of 128 million yuan, + 40.9%, in line with our expectations.
The proportion of deeply processed products continues to increase. The revenue of industrial aluminum profiles / industrial aluminum parts / building aluminum profiles of 1H23 Company increased significantly from + 17% to 1.67 billion yuan, respectively, from + 17% to 1.67 billion yuan compared with the same period last year. In terms of profitability, the gross profit margin of 1H23's industrial aluminum profiles / industrial aluminum parts is respectively + 1.4/0.6ppt to 10.8% 12.9% compared with the same period last year. Taking into account the year-on-year decline in aluminum ingot prices, we expect the processing fee per unit of aluminum frame to be slightly lower.
Trend of development
The promotion of 2H23 component scheduling drives demand upward, and overseas capacity expansion continues to advance. According to PVInfolink data, from July to September, the operating rate of Top10 assembly plant is + 2/+10/+0ppt, and that of other domestic component factories is + 6/+10/+2ppt. We believe that the improvement of production scheduling will drive the demand for component auxiliary materials to continue to rise, and the price game and profit pressure of the main industrial chain is relatively lighter, and the industry as a whole is expected to increase the profit and stability. According to the announcement, the company is promoting the construction of plants in Vietnam and Malaysia. 2H24 is expected to put into production of 120000 tons of aluminum frame and 120000 tons of recycled aluminum, mainly supporting overseas factories for downstream customers. We are optimistic that the follow-up capacity investment will further drive the company's performance growth.
Recycled aluminum reduces costs to optimize profitability, and cars are lightweight to build the second growth pole. The company's application for fixed increase in 2023 was approved in June, and the total amount of funds raised is mainly used for the annual production of 600000 tons of recycled aluminum, which will be put into production in three phases from 2023 to 2025. According to the announcement of the company, recycled aluminum can reduce the production cost by 300-500 yuan / ton, and we estimate that the gross profit margin of aluminum parts can be increased by about 1.2-2.0ppt. We believe that recycled aluminum will help the company to reduce costs and increase efficiency and optimize profitability. With regard to aluminum parts of new energy vehicles, according to the company's announcement, the project with an annual production capacity of 100000 tons is divided into two phases. Trial production of the first phase of 50,000 tons has been started in mid-June, and mass production and sales are expected in July. Equipment orders for the second phase of the project have been issued, and 4Q23 is expected to be put into production. The company's products are mainly aluminum components such as battery trays and front and rear bumpers. We are optimistic that the company will release the production capacity of automotive aluminum parts, further optimize the product structure, and build a new performance growth pole.
Profit forecast and valuation
Considering that the profitability of the industry due to the trend of processing fee compression may decline slightly, we reduce the net profit of 2023E by 15% to 306 million yuan, and introduce a net profit of 437 million yuan of 2024e. The current stock price corresponds to 2023 pound, which corresponds to 12 times Pmax E in 2024, maintaining an outperforming industry rating. Taking into account the downward pressure on the valuation center of the industry, we reduce the target price by 36% to 48 yuan, corresponding to 2023 debacle 2024, which is 16 times PE. There is 34% more upstream space than at present.
Risk
The competition in the industry intensifies, the project schedule is not as expected, and the cash flow risk.