The company's 2023 performance was +10.4% year-on-year, fulfilling the performance promise of the “Reorganization Plan”. In 2023, the company achieved revenue of 18.793 billion yuan (+7.29%), net profit attributable to mother of 1,159 million yuan (+10.40%), and net profit of 966 million yuan (-1.94%) after deducting non-return to mother. Among them, the fourth quarter achieved revenue of 5.150 billion yuan (YoY +43.56%, +3.87%), net profit to mother of 365 million yuan (+452.53% YoY, -3.75% YoY), and net profit of 210 million yuan (+248.01% YoY, -40.82% YoY).

In 2021-2023, the company's net profit to mother was 6.56/10.50/1,159 billion yuan respectively, totaling 2,865 billion yuan, fulfilling the three-year performance promise of not less than 2.8 billion yuan in total net profit to mother.

Net profit without return to mother declined slightly in 2023, mainly driven by the processing sector. The company's non-recurring profit and loss items in 2023 mainly included a total of 260 million yuan in government subsidies received by Guangyuan's subsidiary. In August 2022, part of the company's electrolytic aluminum production capacity in Guangyuan was discontinued due to power shortages, and normal production resumed in March 2023. As a result, the company's overall net profit after fiscal year 23 increased by about 100,000 tons compared to year 22, but the company's overall net profit after the release of the epidemic still declined slightly year on year. The total annual sales volume was 500,000 tons, a year-on-year decline of 20,000 tons; the average gross profit was 2,214 yuan/ton, down 1,493 yuan/ton from '22.

The company's external sales of electrolytic aluminum doubled in 2023. In terms of production and sales, in 2023, the company's electrolytic aluminum production volume (excluding the amount used in downstream aluminum processing) was 435,600 tons (+114%), with a unit gross profit of 3,625 yuan/ton; the output of aluminum processing products was 5098 million tons (-3%), the sales volume was 502,200 thousand tons (-4%), the unit processing fee was 3,499 yuan/ton, and the unit gross profit was 2,214 yuan/ton.

Zhongfu Aluminum's 25% share change has completed commercial registration. In September 2023, the company announced that it would use its own capital of 1,212 billion yuan to acquire 25% of Zhongfu Aluminum's shares held by Yulian Group. At present, the listed company has paid 618 million yuan in the first equity transfer. Zhongfu Aluminum has also completed the shareholder change business registration, and the listed company's shareholding in Zhongfu Aluminum has increased to 76%. Subsequently, the company will need to pay 594 million yuan for the second phase to Yulian Group by October 2024. Currently, the company has a combined production capacity of 750,000 tons of electrolytic aluminum, that is, 250,000 tons of aluminum for thermal power and 500,000 tons of aluminum; equity production capacity is 630,000 tons, that is, 190,000 tons of aluminum for thermal power plus 440,000 tons of aluminum for hydropower.

Risk warning: Demand for electrolytic aluminum falls short of expectations, leading to large fluctuations in aluminum prices; risk of product gross margin falling due to fierce market competition.

Investment advice: Lower profit forecasts and maintain a “buy” rating. The company's 2024-2026 revenue is estimated at 264.00/285.73/29.405 billion yuan, a year-on-year growth rate of +40.48%/8.23%/2.91%; net profit to mother of 19.78/21.86/2,433 billion yuan, a year-on-year growth rate of +70.67%/10.48%/11.31%; diluted EPS of 0.49/0.55/0.61 yuan; and current stock price corresponding PE is 8.0/7.2/6.5x. Considering that the company is a rare enterprise in the electrolytic aluminum industry that still has the ability to increase equity production capacity, it maintains a “buy” rating.