The company disclosed the third quarterly report of 2023: revenue in the first three quarters of 2023 was 13.643 billion yuan (year-on-year-2.06%), net profit was 794 million yuan (year-on-year-31.20%), and non-return net profit was 756 million yuan (- 32.89%). In the third quarter alone, the company achieved revenue of 4.958 billion yuan (year-on-year + 14.97%, month-on-month + 6.83%), net profit of 380 million yuan (year-on-year + 123.13%, month-on-month + 76.94%), and non-return net profit of 355 million yuan (year-on-year + 100.49%, month-on-month + 66.15%).
The year-on-year decline in net profit in the first three quarters was mainly due to the decline in aluminum prices. the average aluminum price in the Yangtze River non-ferrous market was 20322.58 yuan / ton in the first three quarters of 2022 and 18611.98 yuan / ton in the first three quarters of 2023.
Profitability increased quarter by quarter, and the asset-liability ratio further improved. In the first three quarters of 2023, the company's gross profit margin was 16.40%, down 5.05 ppm from the same period last year; the net profit rate was 7.87%, down 6.72 ppm from the same period last year; the expense rate during the period was 7.78%, down 1.66pp from the same period last year, including 2.02% for R & D expenditure.
In the third quarter alone, the company's gross profit margin was 18.92%, an increase of 3.38ppm over the previous quarter; and a net profit margin of 10.46%, an increase of 3.79pp compared with the previous quarter. As of September 30, 2023, the company's asset-liability ratio was 32.77%, lower 7.63pp than at the end of 2022 and 1.28pp lower than June 30, 2023, and the asset-liability ratio continued to improve.
There are two main reasons for the improvement of the company's profitability in the third quarter: 1) the profit per ton of electrolytic aluminum has improved, and we estimate that the profit of hydropower and aluminum in the third quarter is 1000 yuan / ton higher than that in the second quarter; 2) 60% of the company's aluminum processing products are exported. Overseas aluminum processing in the first half of the year is in the stage of destocking, the demand is weak, and the demand has basically returned to normal in the third quarter.
With the acquisition of a 25% stake in Zhongfu Aluminium, the production capacity of electrolytic aluminum is expected to increase from the fourth quarter. On September 23, 2023, the company announced that it planned to use 1.212 billion yuan of its own capital to acquire a 25% stake in Zhongfu Aluminium held by Yulian Group. the bill was passed at the shareholders' meeting on September 28, and the listed company will hold a 76% stake in Zhongfu Aluminium after the acquisition. Up to now, the company has electrolytic aluminum production capacity of 750000 tons, equity capacity of 501900 tons, that is, thermal power aluminum rights and interests capacity of 127500 tons, hydropower and aluminum rights and interests capacity of 374400 tons. Upon completion of the 25 per cent equity acquisition of Zhongfu Aluminum, the company's equity production capacity of electrolytic aluminum will be greatly increased to 628500 tons, including 190000 tons of thermal power aluminum equity capacity and 438500 tons of hydropower aluminum equity production capacity.
Risk hint: the lower-than-expected demand for electrolytic aluminum leads to the risk of sharp fluctuations in aluminum prices; the risk of a decline in gross profit margin caused by fierce market competition.
Investment advice: maintain profit forecasts and maintain "buy" ratings. It is estimated that the company's operating income from 2023 to 2025 will be 25.06 yuan 2.883 billion yuan, respectively, compared with the same period last year. The net profit of the company will be 11.63 20.00 million yuan, and the year-on-year + 10.77%, 71.97%, 13.93%, respectively, and the diluted EPS will be 0.29max, 0.50 PE, 0.57 yuan, respectively, and the current share price will correspond to 11.0 PE, 6.4x, respectively.
Considering that the company is a rare enterprise in the electrolytic aluminum industry that still has the ability to increase production capacity, it maintains a "buy" rating.