Incident: The company announced its 2023 annual report, achieving revenue of 37.625 billion yuan, an increase of -11.89%; net profit to mother of 5.905 billion yuan, an increase of -22.07%; after deduction, it was 5.820 billion yuan, an increase of -25.16%.
Prices of electrolytic aluminum and coal dragged down the company's performance, and steady dividends were in line with expectations. According to the company announcement:
1) Volume: In 2023, the production and sales volume of the company's aluminum products was 151.80 and 1,5273 million tons, respectively, up -7.16% and -6.07% year on year; coal production and sales volume were 716.96 and 7.247 million tons respectively, up 5.25% and 7.41% year on year; production and sales volume of anode carbon blocks were 54.49 and 529,400 tons respectively, up 3.32% and -9.40% year on year; aluminum foil production and sales volume were 8.09 and 819 million tons respectively, up -0.76% year on year , -1.78%. 2) Price: The prices of the company's main products, coal, electrolytic aluminum, and aluminum foil, decreased by 284.42 yuan/ton, 945.32 yuan/ton, and 4,806.53 yuan/ton, respectively; overall, the company's operation is relatively steady, and the performance is in line with expectations. In terms of dividends, the company is based on 2,250 billion shares, each share is 0.80 yuan (tax included), the dividend ratio is 30%, and the dividend rate is 3.57%.
Looking ahead to 2024, the electrolytic aluminum and coal industry is likely to have a tight balance between supply and demand, and prices are not pessimistic. 1) Electrolytic aluminum: On the one hand, domestic production capacity is close to the “ceiling” of production capacity, and the current capacity utilization rate is at an all-time high, and there is limited room for subsequent construction and operation capacity growth; on the other hand, overseas projects are constrained by problems such as energy issues, increasingly stringent ESG requirements, and inadequate infrastructure matching. Existing projects are easily discontinued and difficult to resume production. New construction projects are progressing slowly, and there is limited room for supply-side expansion. Steady growth in demand compounded by slow supply release. It is expected that the domestic electrolytic aluminum supply and demand market is likely to maintain a “tight balance” in 2024, and aluminum prices will continue to be high. 2) Coal: The company's main types of coal are anthracite and poor coal, all of which are high-quality metallurgical coal, mainly used for blast furnace injection and coking coal blending. The demand situation is highly correlated with the steel metallurgy industry. According to the Metallurgical Industry Planning and Research Institute, China's steel demand will slow down, and at the same time, driven by steel export demand, demand for coal for steel metallurgy will stabilize. Taking into account the supply-side and demand-side situation, it is expected that overall coal supply and demand will be relatively balanced in 2024. Prices in the coal market are likely to be stable and fluctuate slightly. Among them, coking coal benefits from economic recovery, and prices are expected to rise moderately.
Profit forecast: We expect the company's EPS to be 2.73, 2.85, and 2.96 yuan respectively in 2024-2026, and PE will be 8, 8 times, and 8 times, respectively, maintaining a “buy” rating.
Risk warning: Demand for coal and aluminum falls short of expectations, supply-side disturbances; large fluctuations in raw material prices, etc.