The company released its 2023 mid-year report. In the first half of 2023, the company achieved revenue of 9.219 billion yuan, -19.46%, and net profit of 350 million yuan, or -41.28% of the same period. On a quarterly basis, 2023Q2 achieved revenue of 4.710 billion yuan, -18.77% year-on-year, +4.47%; net profit of 196 million yuan, -48.68% year-on-year, and +26.53% month-on-month.
Demand for 23H1 aluminum foil dropped significantly, and the company's performance in Q2 improved month-on-month. In the first half of 2023, due to the impact of the global economic environment, industry cycle, etc., and weak domestic and foreign demand, the trade situation was tense and faced with a long inventory removal cycle, and the demand side of aluminum foil declined significantly. Consumption was sluggish due to high inflation in Europe and the US, and customers overstocked goods in 2022. China's overall aluminum foil exports in the first half of the year fell short of expectations, down about 9.9% year on year, putting pressure on business operations. The company's Q2 net profit after deducting non-attributable income was 162 million yuan, +13.63% month-on-month, and the company's performance improved month-on-month.
The battery aluminum foil market space is vast. In the future, the company will build a new battery aluminum foil production capacity to increase its market share. Demand for power batteries for new energy vehicles may maintain a high growth rate. According to GGII forecasts, global power battery shipments will reach 1,550 GWh by 2025, and are expected to reach 3000 GWh by 2030. Furthermore, the energy storage market and the comprehensive promotion of sodium-ion batteries are expected to further increase the demand for lithium batteries. Battery electrodes use aluminum foil as the cathode current collector for lithium batteries, and the market space is very broad. The company took the lead in entering the lithium battery aluminum foil field, cooperated steadily with lithium battery manufacturers such as BYD and Ningde Times. In the future, it will build new production capacity related to battery aluminum foil to increase its market share.
Strengthen the global layout, expand European market share, and enhance market competitiveness. After Europe and the US implement anti-dumping measures, China's exports of aluminum foil will be restricted to a certain extent. However, the new energy industry in Europe and America is on the rise, and major automobile manufacturers and battery manufacturers are setting up overseas. There is huge potential for demand for aluminum foil for batteries overseas in the future. In July 2023, the company completed the acquisition of 100% of the shares of Italian Slim Aluminum and its two wholly-owned subsidiaries. The production capacity of various aluminum sheets, strips and foils is about 135,000 tons/year. Relying on advantages such as the integrity of the upstream and downstream industrial chains, strong new product development capabilities, and a complete sales network, the company will expand its share in the European market and enhance market competitiveness.
We lowered processing fees for various aluminum sheet and foil products, and predicted that the company's net profit for 2023-2025 would be 976 million yuan, 1,189 million yuan, and 1,474 million yuan, respectively (the original 2023-2024 years were 1,646 billion yuan and 2,004 billion yuan).
The valuation was switched to 2024. According to the valuation of a comparable company 14 times PE, the corresponding target price was 18.90 yuan.
Risk warning
Sales of new energy vehicles fell short of expectations. The progress of the company's new construction and technical improvement battery aluminum foil projects fell short of expectations. The global launch of new battery aluminum foil projects and capacity utilization have exceeded expectations. Barriers to foreign trade heighten the risk.