Key points of investment
Event: The company released its 2023 three-quarter report. The first three quarters of 2023 achieved total operating income of 4.71 billion yuan, +52.8% year-on-year, net profit of 211 million yuan, +62.5% year-on-year, and net profit of 189 million yuan after deduction of non-return net profit, +79.4% year-on-year. Among them, the Q3 quarter of 2023 achieved total operating income of 1.89 billion yuan, +83% year-on-year, net profit of 83 million yuan, +112.5% year-on-year, and net profit of 82 million yuan after deducting non-return net profit of 82 million yuan, +151.1% year-on-year.
The profit of Q3 units declined slightly due to government subsidies in Q2 and the rise in new production capacity in Q3, and Q4 profit is expected to increase month-on-month. The month-on-month decline in the company's Q3 single-ton net profit is mainly due to (1) the large amount of government subsidies received in Q2; (2) the new energy vehicle project is in the stage of rising production capacity and customer introduction, with high fixed expenses. In terms of shipment volume, the company maintained month-on-month growth in the first three quarters. Q1/Q2/Q3 shipments were 54,000 tons/69,400 tons/79,700 tons, respectively. According to the shipment volume in the first three quarters and the order situation in the fourth quarter, it is expected to ship 300,000 tons throughout 2023. Q4 shipments are expected to continue to maintain a month-on-month growth trend, and the profit situation is expected to remain stable.
The construction of recycled aluminum production capacity is progressing smoothly, and 2024 is expected to provide new impetus for the company to reduce costs. Recycled aluminum is an important part of the company's upstream layout in the industrial chain. Both current production and capacity planning are in a leading position in the industry. Among them, the 600,000 tons refinanced are expected to contribute 150,000 tons of output in 2024, and the 100,000 ton recycled aluminum project built with own capital is expected to contribute about 100,000 tons of output in 2024. Therefore, the company's recycled aluminum output is expected to be about 250,000 tons in 2024, which will drive the company's raw material costs down further.
Profit forecast and investment suggestions: As a leading manufacturer of photovoltaic aluminum frames, the company has benefited from increased downstream demand, expanded its business in the NEV sector horizontally, further reduced costs vertically through the layout of recycled aluminum production capacity, and continued to increase its competitiveness. We expect the company's net profit from 2023-2025 to be 325 million yuan/525 million yuan/639 million yuan, corresponding to PE of November 8, 2023, 15.1 times /9.4 times/7.7 times, respectively. First coverage, giving the company an “increase in holdings” rating.
Risk warning: macroeconomic fluctuations; industry policy changes; policy effects falling short of expectations; impact of overseas trade policies; changes in industry competition pattern; downstream demand falling short of expectations; raw material price fluctuations.