Event: The company released its 2023 annual report. In 2023, the company achieved operating income of 225.071 billion yuan, a year-on-year decrease of 22.65%; net profit to mother was 6.717 billion yuan, up 60.23% year on year; net profit after deducting non-return to mother was 6.614 billion yuan, up 111.28% year on year. On a quarterly basis, with 2023Q4, the company achieved revenue of 36.666 billion yuan, a year-on-year decrease of 56.82% and a month-on-month decrease of 32.53%; net profit to mother was 1,364 billion yuan, which turned a loss into profit and a year-on-month decrease of 29.55%; net profit without return to mother was 1,685 billion yuan, which turned a year-on-year loss into profit and a decrease of 17.64% month-on-month.
Electrolytic aluminum production declined in 2023. Volume: Alumina production in 2023 was 16.67 million tons, -5.5% year on year; raw aluminum production was 6.79 million tons, -1.31% year over year, mainly affected by the decline in production of the subsidiary Yunlu Co., Ltd.; coal production was 13.5 million tons, +21.5% year over year. Price: In 2023, the price of aluminum is 18,700 yuan/ton, year-on-year, -1,236 yuan/ton. The price of pre-baked anodes is 5,348 yuan/ton, the year-on-year -1,828 yuan/ton, and the year-on-year alumina price is 3119 yuan/ton, and the year-on-year -139 yuan/ton is estimated to be 1,653 yuan/ton of raw aluminum before tax in 2023 (including upstream profit), which is +234 yuan/ton year-on-year. The profit before tax per ton of alumina was 151 yuan/ton, +111 yuan/ton year on year.
2023Q4 performance: The decline in asset impairment, expenses, etc. drove the Q4 performance to turn a year-on-year loss into a profit. Volume: Q4 raw aluminum production was 1.86 million tons, a decrease of 10,000 tons over the previous month. Alumina production was 4.21 million tons, a decrease of 20,000 tons over the previous month.
Coal production was 3.36 million tons, a decrease of 110,000 tons over the previous month. Price: Q4 market aluminum price +126 yuan/ton, alumina price +124 yuan/ton, pre-baked anode price -113 yuan/ton, caustic soda price -61 yuan/ton, petroleum coke price +66 yuan/ton month-on-month, thermal coal price +92 yuan/ton month-on-month. In terms of profit, it is estimated that alumina profit is +116 yuan/ton month-on-month, and electrolytic aluminum profit +95 yuan/ton month-on-month. Q4 performance split. On a month-on-month basis, the main profit increases: expenses and taxes (+840 million yuan, mainly R&D cost reduction of 1,241 billion yuan), other/investment income (+275 million yuan), fair value changes (+190 million yuan); main profit reduction items: gross profit (-886 million yuan), impairment losses, etc. (-770 million yuan), minority shareholders' profit and loss (-341 million yuan). On a year-on-year basis, the main profit increases: expenses and taxes (+2,775 billion), impairment losses, etc. (+1,248 billion), minority shareholders' profit (+2,203 billion yuan), non-operating profit (+193 million); main profit reduction items: gross profit (-5286 million yuan).
Future highlights: The advantages of integration are showing, and the value is expected to be revalued
(1) The integrated layout of the industrial chain is expected to integrate electrolytic aluminum assets in the future. The company's bauxite self-sufficiency rate is about 70%, alumina self-sufficiency rate is 100%, and the integrated layout is perfect. The company has a deep background and strong asset integration capabilities. It is expected to become the main force in the integration of electrolytic aluminum assets in the future, and production capacity is expected to expand further.
(2) Under the “Sino-Special Valuation” system, value is expected to be revalued. Facing an unstable geopolitical environment, focusing on “safety” is an important economic theme. Electrolytic aluminum is an important resource for the national economy. As a leader in bauxite, alumina, and electrolytic aluminum, state-owned enterprise reforms will also improve efficiency, and the company's valuation is expected to be reshaped.
Investment advice: The company's value is expected to be revalued. As aluminum prices rise, the company's performance is more flexible. We expect the company to achieve net profit of 9.111 billion yuan, 10.907 billion yuan, and 12.288 billion yuan in 2024-2026. The PE corresponding to the current price is 14, 12, and 10 times, respectively, maintaining the “recommended” rating.
Risk warning: Demand for electrolytic aluminum fell short of expectations, production limits in Yunnan exceeded expectations, and progress in integrating the electrolytic aluminum industry into carbon trading fell short of expectations.