Incident: The company released its 2023 annual report. In 2023, the company achieved operating income of 42,669 billion yuan, a year-on-year decrease of 11.96%; realized net profit attributable to mother of 3,956 billion yuan, a year-on-year decrease of 13.41%; realized net profit deducted from mother of 3,930 billion yuan, a year-on-year decrease of 9.69%.
Key points of investment:
The company's performance was disrupted to a certain extent due to factors such as electricity restrictions and production restrictions and the fluctuating decline in aluminum prices. In the first and fourth quarters of 2023, the company carried out two rounds of energy efficiency management to reduce the electricity consumption load. During the energy management period, the company's electrolytic aluminum production decreased accordingly. In 2023, the company produced 1,4283 million tons of alumina, 783,500 tons of carbon products, and produced 2.3995 million tons of raw aluminum; around market demand, the company further optimized and adjusted its product structure to produce 1,232,500 tons of aluminum alloy and aluminum processed products. The revenue amount of the company's main products declined due to production and sales, but gross margin increased. By product, the company's operating income of electrolytic aluminum/aluminum processing products/other products was 215.96/204.07/665 billion yuan respectively, up -3.32%/-20.63%/60.68% year-on-year, accounting for 50.61%/47.83%/1.56% of revenue respectively; the gross margins of the company's electrolytic aluminum/aluminum processing products/other products were 17.85%/14.04%/3.87%, respectively, up 0.67%/0.88%/-1.28% from the same period last year.
The company's key projects were successfully put into operation, and the level of informatization and intelligence continued to improve. In 2023, new construction projects such as new graphitized materials from the company's subsidiary Yunlu Yuanxin achieved production results; in cooperation with professional power companies, distributed photovoltaic power generation projects in the factory area invested by power generation companies were accelerated, and the construction of photovoltaic projects in 8 factories including Yunlu Yixin, Yunlu Runxin, and Yunlu Haixin was completed. The cumulative installed capacity of photovoltaic power generation was 216 megawatts, further broadening the company's green power guarantee channels. The ERP systems of the company and affiliated enterprises have been successfully launched, expanding the application of the company's office platform, and enabling online collaborative management of important aspects such as tender project formulation, research, bidding, and procurement approval. Yunlu Yixin's digital twin factory system enables data and model-driven control of all elements of the production process; Yunlu Wenshan Electrolytic Aluminum Smart Factory Project was selected as the national “Intelligent Manufacturing Demonstration Factory”.
The company draws up the 2024 production and operation plan. In 2024, the company's main production and operation goals are: alumina production of about 1.4 million tons, electrolytic aluminum production of about 2.7 million tons, output of aluminum alloy and processed products of about 1.26 million tons, and production of carbon products of about 800,000 tons. The company plans to speed up the pace of chain extension and repair, and achieve new breakthroughs in strengthening and improving the development of the industry. The first is to give full play to the advantages of the company's green aluminum resources, accelerate the construction of downstream alloying, carbon rotary kiln to tank furnaces, etc., to further build the company's complete industrial chain; the second is to further promote harmless disposal and resource utilization technology for aluminum ash, overhaul slag, and carbon slag, plan the industrialization layout of “three wastes” centralized disposal, improve the scale of the industrialization of recycled aluminum, and accelerate research on key technologies such as red clay descalation; the third is to seek vigorous new energy indicators through self-acquisition and cooperation with power generation companies to continuously improve the share of new energy sources.
Maintain the company's “gain” investment rating. According to changes in the macro environment, the company's project progress and future production plans, we adjusted the company's 2024/2025 revenue of 556.24/58.68 billion yuan to 476.11/502.31 billion yuan, and adjusted 2024/2025 net profit of 60.29/6.656 billion yuan to 4.278/4.610 billion yuan. The company's fully diluted EPS in 2024/2025/2026 is expected to be 1.23 yuan/1.33 yuan/1.41 yuan, respectively, according to April 23 Based on the closing price of 13.68 yuan, the corresponding PE was 11.09 times, 10.29 times, and 9.69 times, respectively. The Federal Reserve's interest rate hike is coming to an end. Combined with favorable domestic policies, aluminum prices are expected to rise steadily; with future upgrades to the company's industrial chain and the gradual recovery of downstream demand, the company's performance is expected to continue to recover, maintaining the company's “increase” investment rating in line with the industry's development prospects and the company's industry status.
Risk warning: (1) The Fed's interest rate hike exceeded expectations; (2) the international macroeconomic downturn; (3) the international situation is complex and changing; (4) changes in industry policies; (5) aluminum prices fluctuate greatly; (6) downstream demand falls short of expectations; (7) the company's production capacity supply falls short of expectations.