Incident: The company released its annual report for the year 2010 and the quarterly report for 2024. In 2023, it achieved operating income of 28.975 billion yuan, -12.2% year-on-year; net profit to mother was 2.205 billion yuan, -16.8% year-on-year. In Q1 2024, revenue of 6.825 billion yuan was achieved, -1.71% YoY, +2.9% month-on-month; net profit to mother was 720 million yuan, +43.6% YoY, +26.7%.
Falling aluminum prices and sales restrictions on high-purity aluminum dragged down 23-year results, and 24Q1 performance improved sharply. 1) Aluminum prices declined year on year in 2023, and aluminum prices fluctuated strongly in 24Q1: before low and high in 2023, the average price of aluminum in the Yangtze River Nonferrous Market in 2023 was 18,700 yuan/ton, -6.2% year-on-year. The price of aluminum fluctuated strongly in 24Q1, with an average price of 1.9 million yuan/ton, +0.4% month-on-month. 2) Production and sales of aluminum ingots were basically stable in 2023, and sales of high-purity aluminum were limited: in 2023, the company produced its own production of 1.165,500 tons of aluminum ingots, +0.64%, sales volume of 1.120,700 tons, -3.40% year over year; high purity aluminum output was 42,800 tons, sales volume was 17,000 tons, or -58.02% year over year. Sales were affected by export tariff policies and the weakness of the domestic consumer electronics market. 3) Self-produced aluminum ingots contributed to the main profit, and profitability increased in 24Q1: In 2023, self-produced aluminum ingots achieved gross profit of 3.86 billion yuan, -2.16% over the same period, accounting for 94.3% of gross profit. The estimated operating costs per ton and gross profit per ton were 1.31 and 0.34 million yuan/ton, respectively.
The cost of major raw materials declined in 24Q1 (the average price of petroleum coke was -2% month-on-month), and the price of superimposed aluminum was strong. The company's revenue was +2.9% month-on-month, operating costs -1.2% month-on-month, gross margin increased 3.36pct to 18.69% month-on-month, and net margin increased 2.05 pct to 10.60% month-on-month.
The resource-side and deep-processing layout are gradually deepening, consolidating the advantages of integration. In 2023, the company completed the share acquisition of a local mining company in Guinea and obtained exclusive rights to purchase mineral products. The project has already entered large-scale mining, with an annual production capacity of 6 million tons of bauxite. The battery aluminum foil project continues to advance. The company's Shihezi aluminum foil blank production line is planned to have a production capacity of 300,000 tons. The first phase of 150,000 tons of main equipment has been commissioned and will soon be produced on a large scale. The Jiangyin 20,000 ton battery aluminum foil technical improvement project has completed equipment installation and commissioning, and has entered the trial production stage; 200,000 tons of new production capacity will be built, 150,000 tons in the first phase. Currently, the main equipment is being installed and commissioned, and will be gradually put into operation in 2024.
Profit forecast and investment advice: The company's net profit from 2024 to 2026 is estimated to be 36.53 billion yuan, 43.09, and 4.362 billion yuan, respectively. Considering that the integrated layout of the company's industrial chain continues to deepen, upstream electricity, bauxite, alumina, and anode insurance and cost competitiveness are strong, the future may fully benefit from rising aluminum prices, and for the first time, coverage was given a “gain” rating.
Risk warning: demand falls short of expectations, project progress falls short of expectations, valuation model falls short of expectations, etc.