Incident: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 6.825 billion yuan, a year-on-year decrease of 1.71%; achieved net profit attributable to shareholders of the parent company of 720 million yuan, an increase of 43.55% year-on-year and 26.76% month-on-month; realized net profit attributable to shareholders of the parent company after deduction of 706 million yuan, an increase of 125.14% year-on-year and 27.44% month-on-month.
Aluminum prices rose, and the company's profitability increased: the average price of 2024Q1 domestic electrolytic aluminum (tax included) reached 1,9047 yuan/ton, up 3.19% year on year and 0.43% month on month. The average price of 2024Q1 domestic alumina (tax included) reached 3,323 yuan/ton, up 14.19% year on year and 11.02% month on month. As a complete aluminum industry chain integrated manufacturer with 1.02 million tons of electrolytic aluminum production capacity, 2.5 million tons of alumina production capacity, 600,000 tons of pre-baked anode production capacity, and 6 350 MW self-contained generator sets, the company has fully benefited from the rise in aluminum prices. The company's gross sales margin reached 18.69% during the reporting period, up 6.2 percentage points year on year and 3.36 percentage points month on month.
Control resources from above, expand further processing, and complete the integration of the aluminum industry chain: In order to strengthen the guarantee of upstream bauxite resources and enhance cost competitiveness, the company has completed an equity acquisition of a bauxite company in Guinea and obtained exclusive priority purchasing rights for bauxite products, directly locking in the supply and procurement costs of high-quality bauxite resources. The bauxite project is planned to have an annual production capacity of 5 to 6 million tons, and large-scale mining will begin in 2024 and return to the country to meet the demand for raw materials for the company's domestic alumina production line. After the full completion of the Guinea bauxite project, it will basically solve the company's domestic aluminum oxide production capacity demand, reduce the company's alumina production costs, and enable the company to form a 100% independent self-supply industrial chain integrated production system from bauxite raw materials - alumina - pre-baked anode accessories - electrolytic aluminum. In terms of downstream aluminum processing, the company's Shihezi aluminum foil blank production base and Jiangyin aluminum foil production base are all undergoing equipment installation and commissioning. Some products have already been shipped, test orders from more than 40 customers and certification from more than 10 customers have been completed, and production capacity will be climbing in 2024. Furthermore, the resolution of the high-purity aluminum export tariff policy issue will also enable the company to sell its high-purity aluminum products smoothly and increase the company's profit flexibility this year.
Overseas aluminum industry projects are progressing smoothly: the bauxite project invested and acquired by the company in Indonesia is currently undergoing detailed exploration of resource reserves, and the prerequisites for equity settlement are about to be completed. The company invested in the construction of the first phase of the alumina 2 million ton production capacity project in Indonesia. Currently, the company has submitted the EIA approval procedure to the relevant local authorities. The project has been included in Indonesia's national strategic project list, completed a research report, and entered the design stage. The company targets high-quality, low-cost bauxite resources from overseas and is expected to create a second growth curve.
Investment advice: The company is expected to achieve net profit of 36.89/40.70/4.906 billion yuan in 2024-2026, EPS of 0.79/0.88/1.06 yuan, respectively, corresponding to 2024-2026 PE of 8.8/7.9/6.6 times. The further improvement of the company's electrolytic aluminum industry chain will fully benefit from rising aluminum prices. Profitability is expected to increase, and maintain the “recommended” rating.
Risk warning: the risk of a sharp drop in the price of electrolytic aluminum; the risk of a sharp drop in the price of alumina; the risk of a sharp rise in electricity costs and pre-baked anode costs; the risk that the company's construction project progress falls short of expectations.