Large non-ferrous state-owned enterprises. Integrated layout of the aluminum industry China Aluminum is the only large international aluminum company with a complete industrial chain in the global aluminum industry. Its business includes three main core industries: bauxite, alumina, and electrolytic aluminum; three core sub-industries:
High purity aluminum, aluminum alloy, fine alumina; three supporting industries: carbon, coal, electricity. The company's 2023 revenue/net profit to mother was 225.071 billion yuan and 6.717 billion yuan, respectively. The decline in revenue was mainly due to the company's reduction in trade business with a high share but relatively low gross profit. The increase in profit was due to the optimization of the cost of electrolytic aluminum, as well as the company's cost reduction and efficiency, and asset optimization. In 2023, the company's primary aluminum and alumina revenue was 1253.12 billion yuan and 53.526 billion yuan respectively, accounting for 55.68% and 23.78% of revenue respectively; the raw aluminum and alumina sectors contributed 11,243 billion yuan and 985 million yuan respectively. We believe that with the active advancement of alumina projects in Indonesia and Guinea, the performance of the company's alumina sector still has room for growth.
There is a mismatch between supply and demand in the industry, and aluminum prices still have room to rise.
On the raw material side, dependence on domestic bauxite imports continues to increase. In 2023, China's bauxite production was 93 million tons, and 993.15 million tons of bauxite were imported from Guinea. However, overseas policies and energy issues continued to disrupt the supply of raw materials. We believe that the stable supply of subsequent raw materials will also become one of the competitiveness of aluminum companies. On the supply side, the upper limit of the medium- to long-term production capacity of electrolytic aluminum is currently controlled at 45 million tons. All new production capacity needs to be replaced with the original production capacity indicators. The current operating capacity is basically close to the ceiling, and the increase on the supply side is limited. On the demand side, aluminum in the automotive and photovoltaic industry contributes to increased demand: new energy vehicles require higher weight reduction and battery life. With the development of new energy vehicles, lightweight and high-strength automotive aluminum profiles may continue to be replaced; high growth in photovoltaic installed capacity is driving up demand for photovoltaic aluminum frames.
Key projects continue to be released, and the advantages of integration are highlighted.
In terms of bauxite, the company has the largest domestic bauxite holdings and continues to expand its overseas layout. Guinea's Bofa mine has 1,761 billion tons of resources, a high resource self-sufficiency rate and excellent endowments. Stable and reliable bauxite resources highlight the company's integrated advantages. On the midstream and downstream side, the company's aluminum products will continue to be put into production in the next two years: Guangxi Huasheng Phase II's 2 million-ton alumina project, the Qinghai branch's 500,000 tons, and Inner Mongolia's Huayun Phase III 420,000 ton electrolytic aluminum project are expected to be released. Key projects are expected to drive the branch's volume profit to rise sharply.
Investment advice
We expect the company's net profit to be 80.43/96.69/11.178 billion yuan in 2024/25/26, respectively, and the corresponding PE is 15.79/13.13/11.36 times, respectively. For the first time, coverage gives a “buy” rating.
Risk warning
Aluminum prices fluctuated greatly; production capacity release fell short of expectations; downstream demand fell short of expectations, etc.