Key points of investment:
Incident: The company released its 2023 annual report: for the full year of 2023, the company achieved operating income of 225 million yuan, -22.7% year on year; net profit to mother was 6.72 billion yuan, +60.2% year over year. Among them, 23Q4 achieved operating income of 36.67 billion yuan, -32.5% month-on-month, and net profit to mother of 1.36 billion yuan, or -29.5% month-on-month.
The decline in production of electrolytic aluminum and coal in 23Q4 and asset depreciation led to a month-on-month decline in performance. 1) Quantity:
23Q4 alumina production was 6.37 million tons, +23% month-on-month; raw aluminum production was 1.86 million tons, -0.5% month-on-month, and 1.86 million tons, -1.1% month-on-month; coal production was 3.36 million tons, -3.2% month-on-month. 2) Price: The average price of 23Q4 alumina was 3005 yuan/ton, +4.0% month-on-month; the average price of electrolytic aluminum was 1.9 million yuan/ton, +0.7% month-on-month; the average price of pre-baked anodes in East China was 5,427 yuan/ton, -5.5% month-on-month; the average price of 5,500Q thermal coal was 957.7 yuan/ton, +10.6% YoY. 3) Profit: Q4 gross profit was -890 million yuan/ -10.3% month-on-month, mainly due to a decline in sales of aluminum products and coal production; asset impairment losses of 610 million yuan were calculated in the current period, an increase of 680 million yuan over the previous period.
The sharp year-on-year decline in asset impairment in '23 led to an increase in performance. 1) Volume: Alumina production in '23 was 21.66 million tons, -5.5% year on year, export sales of 6.52 million tons; primary aluminum (including aluminum alloy) output was 6.79 million tons, -1.3% year on year, sales volume 6.8 million tons, -0.7% month on month; coal production was 1.35 million tons, +21.5% month on month.
2) Price: The average price of electrolytic aluminum in '23 was 18,700 yuan/ton, -6.2%; the average price of alumina was 2,903 yuan/ton, -1.6%; the average price of pre-baked anodes in East China was 6,287 yuan/ton, -23.2% year on year; the average price of 5,500Q thermal coal was 965 yuan/ton, -24.0% year on year. 3) Profit: Due to the decline in both volume and price, gross profit fell 4.4 billion yuan year on year in '23; asset impairment losses decreased by 4.1 billion yuan year on year; R&D expenses decreased by 1.1 billion yuan year on year.
In 24 years, the volume and price of aluminum products have risen sharply, and performance may reach a new level. 1) Volume: Construction of Guangxi Huasheng Phase II with a high quality production capacity of 2 million tons began in '23. The first production line will be put into operation in December '24, the second production line is expected to be put into operation in January '25, and alumina production is expected to be 22 million tons in '24. As Huayun Phase III's annual production of 420,000 tons of electrolytic aluminum is about to be put into operation, the production of electrolytic aluminum is expected to increase to 7 million tons. 2) Price: Due to the shortage of ore, the price of alumina rose to 3,200 yuan/ton; due to the tight balance of electrolytic aluminum, the price is easy to rise and fall. The average price for the whole of '24 is expected to be 19,000 yuan/ton, +1.6% compared to the same period last year.
Profit forecast and investment suggestions: According to the latest market price, we lowered the price of aluminum to 1.9/2.0/21,000 yuan/ton in 24-26 and raised the price of alumina to 3,200 yuan/ton. The net profit for 24-26 is estimated to be 92/118/14.3 billion yuan (81/89 billion yuan before 24-25), and EPS is 0.54, 0.69, and 0.83 yuan. Considering the company's leading position and China's special valuation attributes, the company was given 20 times PE in 24 years, corresponding to a target price of 10.77 yuan and a “buy” rating.
Risk warning: downstream demand falls short of expectations, risk of fluctuations in raw materials and energy prices, and the impact of dry water and electricity in Yunnan