Incident: The company released its 2023 annual report. In 2023, the company's revenue was 37.625 billion yuan, a year-on-year decrease of 11.89%; net profit to mother was 5.905 billion yuan, a year-on-year decrease of 22.07%; net profit after deducting non-return to mother was 5.820 billion yuan, a decrease of 25.16% year-on-year. Among them, 2023Q4 revenue was 9.602 billion yuan, up 0.86% month-on-month; net profit to mother was 1,470 billion yuan, a slight decrease of 0.33%; net profit after deducting non-return to mother was 1,439 billion yuan, up 1.58% month-on-month.
The company's audit adjusted revenue and profit for the first three quarters. After the adjustment, revenue for the first three quarters decreased by 607 million yuan compared to before the adjustment, net profit to mother increased 333 million yuan, and net profit after deducting non-return to mother increased by 333 million yuan. Due to the power limit load in Yunnan in 2023, electrolytic aluminum failed to complete its annual plan.
? Volume: In 2023, the sales volume of electrolytic aluminum/coal was 152.73/7.247,700 tons, -6.07%/+7.41%, completing 95.45%/107.21% of the annual plan, respectively. Among them, Yunnan Shenhuo reduced production by 92,700 tons due to electricity load. In 2024, the company plans to produce 1.5 million tons/6.9 million tons of electrolytic aluminum/coal per year.
? Price: According to Tonghuashun, the closing price of SHFE aluminum in 2023 was 18624.9 yuan/ton, -6.5% (or -1,289 yuan/ton), and the average price of anthracite was about 1,755 yuan/ton, compared to -332 yuan/ton; the average price of lean coal was about 1,923 yuan/ton. The average price of alumina on the cost side was 2,900.6 yuan/ton, -1.5% (or -42.9 yuan/ton), and the average price of pre-baked anodes was 4762.9 yuan/ton, and -1,852 yuan/ton.
In 2023, the average price of Q4SHFE aluminum was 18,981 yuan/ton, +198.5 yuan/ton, and +225.7 yuan/ton; the average price of anthracite was about 1,597 yuan/ton, +83 yuan/ton; the average price of lean coal was about 2,035 yuan/ton, +278 yuan/ton. The average price of alumina on the cost side was 2,958 yuan/ton, +181.3 yuan/ton, +99.8 yuan/ton, and the average price of pre-baked anodes was 4100.5 yuan/ton, year-on-year -2993.5 yuan/ton, and -104.52 yuan/ton month-on-month.
Considering that one ton of electrolytic aluminum requires about 0.47 tons of pre-baked anode and 1.9 tons of alumina, the impact of the month-on-month decline in raw material costs in 2023 was an increase of 842.43 yuan on the gross profit per ton, and the month-on-month increase in raw material costs in Q4 in 2023 had a decrease of 124.3 yuan on the gross profit per ton.
? Profit: The coal sector achieved gross profit of 3.399 billion yuan, gross profit of 469.00 yuan/ton; the aluminum ingot sector achieved gross profit of 6.037 billion yuan, gross profit of 3,953 yuan/ton.
Yunnan Shenhuo's equity ratio has increased, and the carbon project is progressing steadily:
? The company previously announced that it plans to acquire 9.90% of Yunnan Shenhuo's shares held by Henan Asset Fund and 4.95% of Yunnan Shenhuo's shares held by Shangqiu Xinfa through an agreement transfer. The purchase prices were 966 million yuan and 483 million yuan respectively. According to the three quarterly reports, the company has completed the registration procedure for industrial and commercial changes, and the company holds 58.25% of Yunnan Shenhuo's shares.
At the same time, in order to give full play to the advantages of Yunnan's green hydropower and aluminum industry and further improve the company's industrial chain, it was agreed that Yunnan Shenhuo would invest 1.4 billion yuan to build a carbon project with an annual output of 400,000 tons. According to the company's annual report, the progress of the Yunnan Shenhuo Carbon Project has reached 59%.
Overseas projects are progressing slowly, and strong restrictions on the supply of electrolytic aluminum continue to exist. At the same time, PV production schedules have exceeded expectations, pessimistic expectations for real estate completion have bottomed out, and aluminum prices are expected to remain high and continue to strengthen.
SMM expects domestic component production to reach around 54GW in March, up 80% from February, while completion in January-January is -20% year-on-year, fully releasing pessimism. Electrolytic aluminum is expected to maintain a tight balance throughout the year as the automobile, home appliances, packaging and other sectors maintain a tight balance. At the same time, considering that there is still considerable room for improvement in the conversion rate of aluminum to water in the future, the marginal improvement in demand will give the price of electrolytic aluminum upward flexibility.
Investment advice:
We expect revenue estimates for 2024-2026 to be 386.36, 395.37 billion yuan, 39.537 billion yuan, and net profit of 61.49 billion yuan, 63.55 billion yuan, and 6.380 billion yuan, corresponding to EPS of 2.73, 2.82, and 2.84 yuan/share, respectively. Currently, the corresponding PE price is 7.2, 7.0, and 7.0 times. Maintain a “buy-A” rating, and maintain a 6-month target price of 22.5 yuan/share.
Risk warning: Demand falls short of expectations, product prices fluctuate, limited voltage production exceeds expectations, environmental risks and project progress fall short of expectations.