The company's revenue in 2023H1 grew at a year-on-year rate of -19.46%, and its net profit grew at a year-on-year rate of -41.28%. In the first half of 2023, the company achieved operating income of 9.219 billion yuan (-19.46%), net profit of 350 million yuan (-41.28% of the same period), net profit of not attributable to parent of 304 million yuan (-48.69% of the same period) after deducting net profit of 304 million yuan (-48.69% year on year). Among them, quarterly revenue for the second quarter was 4.710 billion yuan (+4.47% month-on-month), net profit for the second quarter was 196 million yuan (+26.53% month-on-month), net profit of non-attributable income was 162 million yuan (+13.63% month-on-month). The pricing model for the company's products is aluminum-based price+processing fee. The year-on-year decline in revenue in the first half of the year was mainly due to a drop in the price of electrolytic aluminum. The average price of 23H1 electrolytic aluminum was 18,489 yuan/ton, down 13.59% from the previous year. The year-on-year decline in profit was due to downstream demand falling short of expectations, yet many companies in the battery aluminum foil industry have plans to build new production capacity/expand production, so product processing costs have been lowered.
Battery foil sales improved in the second quarter, and the growth rate was basically in line with expectations. In the first half of 2023, the company's aluminum foil products achieved revenue of 7.736 billion yuan (-21.90% year on year), and aluminum plate strip products achieved revenue of 841 million yuan (-21.09% year on year). For battery aluminum foil products, which mainly contribute to profit, according to our split and speculations, 1) Volume: The company's 22H1/22H2/23H1 achieved battery aluminum foil sales volume of 4.4/64/ 56,000 tons respectively, of which 23Q1 sold 25,000 tons and 23Q2 sold 31,000 tons; 2) Price: The company's battery aluminum foil products lowered processing fees twice this year, falling about 1,000 yuan/ton for the first time in the year. Currently, net profit per ton of battery foil is over 4000 yuan/ton, and processing costs are basically stable.
I'm optimistic about the layout of the company's overseas bases. One of the company's major driving forces this year is the European and Italian base. The base originally produced packaging foil and had a production capacity of 30,000 tons/year. If it were converted to battery foil, the production capacity could reach 20,000 tons/year. It is expected that the company's overseas base will begin to expand this year. The profit per ton will increase compared to the domestic market. After completion, it will become the only battery aluminum foil company in China that currently has an overseas factory, and has an absolute first-mover advantage in laying out overseas markets. According to GGII forecasts, global power battery shipments will reach 1,550 GWh by 2025, and are expected to reach 3,000 GWh by 2030. The corresponding demand for battery aluminum foil is 54/105 million tons. The growth rate of expansion of existing domestic battery aluminum foil production capacity is still unable to meet the expanding needs of the new energy industry.
Risk warning: The risk that demand falls short of expectations; the risk of increased competition in the industry and a decline in processing costs due to overcapacity.
Investment advice: Lower the profit forecast and give a “increase in holdings” rating. Due to poor recovery in downstream demand, we lowered the company's operating income from 2023-2025 to 199.99/223.48/24.297 billion yuan (original value was 230.79/254.50/27.821 billion yuan), year-on-year growth rate -7.43%/11.75%/8.72%; net profit of Gimu to 994/12.31/1,505 billion yuan (original value was 14.91/19.48/2,328 billion yuan), year-on-year growth rate of -34.54%/36.17%/22.18%; diluted EPS is 1.02/1.39/1.70, and the PE corresponding to the current stock price is 15.1/11.1/9.1x, respectively, and downgraded to the “increase in holdings” rating.