Key points of investment:
Incident: The company announced its results for the first half of 2023. 23H1 exceeded expectations, and revenue and profit reached record highs for the same period. 1) The first half of 2023 achieved revenue of 4.17 billion yuan (yoy +1.7%); net profit of 4.1 billion yuan (yoy +34.0%), net profit of non-return of 4.1 million yuan (yoy +34.5%), mainly due to strong demand for new energy sources and increased sales volume. 2) 2023Q2 achieved revenue of 2.17 billion yuan (yoy +2.8%, qoq +8.7%), net profit of 240 million yuan (yoy +18.5%, qoq +43.6%), net profit of 240 million yuan after deducting non-return net profit of 240 million yuan (yoy +19.3%, qoq +47.2%).
We expect product sales volume of 180,000 tons in the first half of '23, corresponding to net profit of about 2,300 yuan/ton. Assuming that the company's processing fee of 23H1 falls slightly from '22, the cost of raw materials will change (fall) in the same direction as the price of aluminum, and increase from '22 to 2030.
Data centers and energy storage liquid cooling provide incremental market space, and the company already has reserves of related products. 1) Demand for AI capacity data centers is accelerating, the power density of single cabinets is increasing rapidly, and energy storage battery discharge can be expected as lithium prices fall. There is a clear trend of switching from air cooling to liquid cooling under high heat dissipation efficiency requirements, and there is a lot of room for future prospects for the company's liquid cooling board material products. 2) The company actively develops heat dissipation materials in the field of energy storage represented by expansion board materials, large-size water-cooled plate materials, etc., as well as heat dissipation materials for 5G base stations, big data centers, etc.
The current production capacity is 34-350,000 tons, and it is planned to expand the production capacity of Chongqing Phase II by 150,000 tons (for new energy vehicles). 1) Rapid expansion of production capacity: Currently, the company's total production capacity of aluminum sheet and foil is 34-350,000 tons (200,000 tons in Chongqing Phase I, 140,000 tons in Shanghai). Additionally, the company plans to build a production capacity of 150,000 tons for Chongqing Phase II. 2) Cost reduction: Chongqing has lower energy costs and higher yield than the Shanghai base, and there is room for the company's tonnes of processing costs to decline.
Maintain buy ratings. The company is a leading aluminum enterprise for automotive thermal management. The new Chongqing base opened up shipping space after it was fully put into operation, and the industry pattern is stable. The company's product yield, cost control ability, and profitability are ahead of peers. The company already has liquid-cooled material products related to automobiles, new energy vehicles, energy storage, and data centers, which will fully benefit from the volume of demand in related industries. Maintaining the original profit forecast, the company's net profit to parent is estimated to be 10.0/13.0/1.5 billion yuan in 23-25, corresponding to PE 15/12/10 times, maintaining the purchase rating.
Risk warning: Product processing costs fell; Chongqing base construction fell short of expectations; international trade friction