Core views

1. In the first half of 2023, the company achieved net profit of 1,313 million yuan, a year-on-year decrease of 28.08%; 2023Q2 quarterly net profit of 794 million yuan, a year-on-year decrease of 28.06%, and a year-on-year increase of 53.03%. The drop in aluminum prices put pressure on the company's performance in the first half of the year.

2. The company is deeply involved in the aluminum processing industry chain. In recent years, it has focused on developing high-value-added products such as automobile panels, aviation panels, and power battery foils. In the first half of the year, the sales volume of the company's high-end products accounted for about 14% of the total sales volume of aluminum products, an increase of about 1 percentage point over the same period last year; the gross profit of high-end products accounted for about 29% of the company's total gross profit of aluminum products, an increase of about 8 percentage points over the same period last year.

It is expected that with the release of production capacity for high-end products, the profit share of the company's high-end products will further increase.

3. Consolidate the leading position of lightweight aluminum plates for automobiles in China, and accelerate the third phase of the automobile plate project; technology research and development and process improvements continue to advance, helping domestic production and replacement of aviation boards.

occurrences

The company released its 2023 semi-annual report

In the first half of 2023, the company achieved operating income of 145 billion yuan, a year-on-year decrease of 19.04%; realized net profit of 1,313 billion yuan, a year-on-year decrease of 28.08%; realized net profit of non-attributable net profit of 1,279 million yuan, a year-on-year decrease of 28.90%; 2023Q2 quarterly net profit reached 794 million yuan, a year-on-year decrease of 28.06%, and a year-on-year increase of 53.03%.

Brief review

The drop in aluminum prices puts pressure on the company's performance

In the first half of 2023, the average price of SHFE aluminum was 18,466 yuan/ton, down 13.77% from the same period last year; the drop in aluminum prices caused the company's net profit to drop significantly in the first half of the year.

The traditional advantageous business is developing steadily, and the proportion of high-end products is steadily increasing. The company is deeply involved in the aluminum processing industry chain. At present, it has built a high-quality, multi-level and high-end product series matrix. In recent years, the company has focused on developing high-value-added products such as automobile panels, aviation boards, and power battery foils. Currently, it has a production capacity of 200,000 tons of automobile panels, 200,000 tons of construction, and 21,000 tons of power battery foils. The sales volume of the company's high-end products in the first half of the year accounted for about 14% of the total sales volume of aluminum products, an increase of about 1 percentage point over the same period last year; the gross profit of high-end products accounted for about 29% of the company's total gross profit of aluminum products, an increase of about 8 percentage points over the same period last year. It is expected that with the release of production capacity for high-end products, the profit share of the company's high-end products will further increase.

Consolidate the leading position of domestic automobile lightweight aluminum plate, accelerate the promotion of the third phase automobile plate project. The company is the first domestic manufacturer to achieve mass production of four doors and two aluminum plates. Currently, it has established long-term cooperative relationships with many well-known automobile manufacturers. On the basis of existing market advantages and high barrier product technical levels, the company has dug deep into production and marketing capabilities, aimed at developing key technologies for external panels, achieved continuous and steady growth in supply volume, and continued to promote the construction progress of the third phase automobile plate project, further consolidating the company's position as a leading domestic automotive lightweight aluminum plate enterprise. It is expected that with the mass production of new models by OEMs and the switching of parts for existing projects, the company's product supply share is expected to increase further.

Technology research and development and process improvement continue to advance. Helping the domestic aviation board replacement company is the only domestic enterprise that also supplies OEMs such as Boeing, Airbus, and COMAC. The products supplied by the company are mature and stable, and are highly competitive in terms of quality, price, and delivery. The company continues to promote technology research and development and process improvement, and continues to make new breakthroughs in aviation plate R&D and trial production, qualification certification, and market development. At the same time, it also helps the C919 project for large domestic aircraft and promotes the domestic substitution process for aviation boards.

Investment suggestions: The company's net profit from 2023 to 2025 is estimated to be 3,639 billion yuan, 4,085 billion yuan, and 4.743 billion yuan respectively. The PE corresponding to the current stock price is 10.0, 8.9, and 7.7 times, respectively. Considering the company's position and growth in the aluminum industry, the company is given a “buy” rating.

Risk analysis

1. The construction progress of the project fell short of expectations;

2. Aluminum prices fluctuate greatly; the pricing model for the company's domestic processing products is “aluminum price+processing fee”, and foreign business is settled in the form of “LME+ processing fee”. The company responds to the shortage of electrolytic aluminum production capacity caused by selling electrolytic aluminum indicators by entrusting processing or outsourcing aluminum ingots. The cost of aluminum ingots is affected by the relationship between supply and demand in the market. There may be a risk of fluctuation in the aluminum ingot market price and the risk of untimely transmission downstream, which has a certain impact on the company's business. According to our estimates, if the price of aluminum falls by 5%/10%, the company's revenue will drop by 4.4%/8.8% in 2023; 3. Industry competition risk. Based on the rapid growth of China's aluminum processing industry over the years and a good market space in the future, the number of domestic enterprises entering the industry has continued to increase in recent years, and foreign companies are also looking for domestic partners or direct factory construction and investment. At present, a number of companies have announced their entry into the automotive board industry, and market competition is becoming increasingly fierce.