Core views:
Net profit returned to mother decreased by 20% in 24Q1, in line with expectations. According to the company's financial report, 24Q1 achieved operating income of 11.4 billion yuan, +20% YoY, -12% month-on-month, net profit of 1,164 billion yuan, +32% YoY, -20% month-on-month, asset disposal income of 167 million yuan from the sale of 100,000 tons of electrolytic aluminum, deducted non-net profit of 1,035 million yuan, +18% YoY, -29% month-on-month, basic earnings per share of 0.34 yuan/share, +32% YoY, -20% month-on-month, net operating cash flow of 930 million yuan, -34% month-on-month, and -29% month-on-month balance ratio 23.51%, compared with -2.09 PCT at the end of 23. The main reasons for the month-on-month decline in 24Q1 performance were: 1. Production declined month-on-month due to the reduction in electrolytic aluminum production in Yunnan. 2. The cost of alumina and electricity increased month-on-month. According to Wind, iFind, 24Q1, the average price of SHFE aluminum rose 1% month-on-month to 19055 yuan/ton, while the average electricity price of Guangxi Alumina, Southwest Anode, and Kunming Electric Power Exchange rose 14%, -5%, and 20%, respectively. It is estimated that the cost of a ton of electrolytic aluminum increased by 1,399 yuan/ton, and the gross profit per ton fell 1,267 yuan/ton.
In 24Q1, the reduction in production of electrolytic aluminum in Yunnan was weaker than in 23Q1. The company's production of aluminum products increased year-on-year. It is expected that 24Q2 will increase its production of electrolytic aluminum year-on-year. According to the company's financial report, 24Q1 produced 365,600 tons of alumina, up 2.16% year on year; produced 198,400 tons of carbon products, up 2.76 percent year on year; produced 636,900 tons of raw aluminum, up 23.3% year on year; produced 278,500 tons of aluminum alloy and aluminum processing products, up 6.03% year on year. According to Aladdin, Yunnan Province has fully liberalized electricity consumption load management since April 10, and Yunlu Yixin has formulated a plan to resume production. Recently, it has achieved stable production at full capacity and high production. The Q1 capacity utilization rate increased 26.8% year over year.
Profit forecasting and investment advice. The company's 2024-2026 EPS is expected to be 1.39/1.41/1.47 yuan/share. Referring to comparable company valuations, the company will be given 14 times PE in 2024, corresponding to a reasonable value of 19.50 yuan/share, and a “buy” rating.
Risk warning. The macroeconomy fluctuated greatly; aluminum prices fell sharply; electricity supply was scarce in Yunnan, and the company's electrolytic aluminum production fell short of expectations; and costs and prices rose beyond expectations.