Key points of investment
The company lays out high-end aluminum deep-processing products downward. In 2023, the gross profit of high-end products accounts for 30% of the company's total gross profit, and the comprehensive gross margin of 2023Q3 is 20.47%, far higher than the average of 15.13% of companies in the same industry. With the release of new production capacity, the company will usher in a phase of sharp rise in volume and price:
1) The company's automotive board business has a first-mover advantage and is expected to usher in 200,000 tons of additional production capacity in '24. The company is the only A-share company that can mass-produce automotive exterior panels and interior panels, and has taken the lead in completing 8 certifications for related car companies' 5 series interior panels and 6 series exterior panel materials, leading the industry for 2-3 years; the company's domestic market share for automotive panels in 2023 was about 25%, fully benefiting from the rapid increase in demand for automotive panels (China's automobile board is expected to grow 19.1% in 2023-2025); the company currently has 200,000 tons of automotive board production capacity. We expect an additional 200,000 tons of production capacity to be put into operation within 2024.
2) The company's aviation board business successfully entered the COMAC C919 supply system, and the growth curve of aviation aluminum was clear. The company is the only domestic aviation board company that also supplies OEMs such as Boeing, Airbus, COMAC, and China Aviation Industry. The company currently has a production capacity of 50,000 tons of aviation boards, and it is expected that with the gradual implementation of C919 orders, the company's aviation board capacity utilization rate will continue to increase.
3) The company entered the field of high-end power battery foils, benefiting from the rapid increase in the penetration rate of new energy vehicles and broad downstream product space. The company focuses on the field of 10-12 μm high-end battery foil. It has now entered the supply system of well-known domestic battery companies such as Ningde Era, China Airlines, Guoxuan Hi-Tech, and Everweft Lithium Energy. The company now has a production capacity of 21,000 tons of power battery foil, and production is climbing smoothly.
The company deployed Indonesian alumina production capacity upward and divested the old electrolytic aluminum production capacity to fully enjoy the rise in industry prosperity: 1) The company laid out 2 million tons of alumina in Indonesia to be fully produced in Q2 2023; 2) The company invested in the construction of 250,000 tons of electrolytic aluminum and 260,000 tons of carbon projects, which are expected to be completed and put into operation within 2026; 3) The company transferred 336,000 tons of backward electrolytic aluminum production capacity, and made up for the gap in demand for electrolytic aluminum through outsourced processing and outsourcing of aluminum ingots; the company also invested 100,000 tons of recycled aluminum to be fully reclaimed project, and Small-scale trial production will be achieved in 2023.
The company drastically increased the dividend and repurchase ratio and increased shareholder returns: 1) The company plans to repurchase shares and cancel them every year from 2024-2026 with no less than 300 million yuan and no more than 600 million yuan of its own funds; 2) The company plans to pay a dividend (excluding repurchases) ratio of 40.44% of net profit to mother for the year (13.32% in the previous year), and the dividend rate is 3.56% based on the stock price on March 28, 2024.
Profit forecast and investment rating: We expect the company to achieve revenue of 338.57/367.22/38.533 billion yuan respectively in 2024-2026, with year-on-year growth rates of 17.38%/8.46%/4.93%, respectively; net profit attributable to shareholders of the parent company will be 39.33/42.20/4.569 billion yuan, respectively, with year-on-year growth rates of 13.20%/7.30%/8.27%, respectively. PE corresponding to 2024-2026 was 10.03/9.35/8.64 times, respectively, lower than comparable company estimates. Considering that the company is about to release high-end aluminum products in the future, the layout of the overseas aluminum industry chain is relatively clear, and the performance is highly deterministic, the first coverage gave the company a “buy” rating.
Risk warning: There is a risk that aluminum prices will fall due to downstream demand falling short of expectations; the risk that the company's new automobile board production capacity of 200,000 tons will fall short of expectations; the risk that the US dollar will continue to strengthen.