Key points of investment:

Incident: The company announced its results for the first quarter of 2023 and 2024. The 23-year results met expectations and exceeded expectations in 24Q1.

1) In 2023, we achieved revenue of 9.29 billion yuan (yoy +8.7%), net profit attributable to mother of 90 million yuan (yoy +35.1%), and net profit of 800 million yuan (yoy +35.9%) after deducting net profit of 800 million yuan (yoy +35.9%), mainly due to increased sales volume and net profit per ton. 2) 2023Q4 achieved revenue of 2.60 billion yuan (yoy +17.0%, qoq +2.8%), net profit to mother of 240 million yuan (yoy +58.1%, qoq -5.7%), net profit of 220 million yuan (yoy +63.3%, qoq -9.0%).

3) 2024Q1 achieved revenue of 2.36 billion yuan (yoy 18.3%, qoq -9.0%), net profit of 250 million yuan (yoy +49.5%, qoq +7.5%), net profit after deducting non-return to mother of 250 million yuan (yoy +51.45%, qoq +11.5%). The performance exceeded expectations mainly due to the release of high-end products, increased production, and increased net profit per ton.

Product sales increased 16% year on year in '23, corresponding to net profit of about 2,350 yuan/ton (yoy+326 yuan/ton). 1) Sales volume: In 2023, the company's total sales volume of aluminum sheet and foil reached 383,000 tons (yoy +16.3%). 2) Profit: In 2023, the company's products corresponded to gross profit/ton net profit of about 3864/2350 yuan/ton, an increase of 253/326 yuan/ton over the previous year. It was mainly due to the increase in production, the reduction in fixed costs per unit, and lean management to promote process improvement, energy saving and consumption reduction in key processes, and an increase in waste utilization. 3) Exports: 2023 export business revenue of 2.70 billion yuan (accounting for 29%), gross profit of 545 million yuan (accounting for 37%), gross profit margin of 20.2% (yoy+1.25pct).

Data centers, energy storage liquid cooling provide incremental market space, explore overseas markets, and continue to develop new products. 1) Demand for AI emission data centers is accelerating, the power density of single cabinets is rapidly increasing, energy storage battery capacity can be expected when lithium prices fall, and the trend of air cooling to liquid cooling is obvious under high cooling efficiency requirements. Corresponding to the company's liquid cooling plate material products, the company actively develops cooling materials in the energy storage field represented by expansion board materials, large-size water-cooled plate materials, etc., as well as cooling materials for 5G base stations and big data centers. 2) In terms of overseas business, overseas water-cooled plate materials have been continuously supplied to various automobile companies' supporting material projects in Japan, South Korea, etc., driving the total volume of foreign trade NEV business to continue to rise. 3) The stamping parts business achieved a new breakthrough, successfully completed the installation, commissioning and mass production of the water-cooled plate stamping machine according to the plan, and achieved fixed targets, including a number of new projects, which is expected to be delivered in subsequent batches. 4) Complete targeted and prepared hundreds of new projects throughout the year to accelerate research and development of various new products including pre-embedded solder materials, high-strength water-cooled plate materials, blow-expansion water-cooled plate materials, and green low-carbon alloys.

The current production capacity is 34-350,000 tons. It is expected that supporting front-end processing can achieve a maximum production capacity of 500,000 tons. It is planned to expand Chongqing Phase II's production capacity by 150,000 tons (for new energy vehicles). 1) Rapid expansion of production capacity: Currently, the company's total production capacity of aluminum sheet and foil is 34-350,000 tons (200,000 tons in Chongqing Phase 1, 14,000-150,000 tons in Shanghai). We expect supporting front-end processing to achieve a maximum production capacity of 500,000 tons. In addition, the company plans to build 150,000 tons of production capacity in Chongqing Phase II. 2) Cost reduction: Compared with the Shanghai base, Chongqing has lower energy costs and higher yield, and the company's tonne processing costs have room to decline.

Maintain a buy rating. The company is a leading aluminum company for automotive thermal management. After the new Chongqing base is fully put into operation, the industry pattern is stable. The company's product yield, cost control ability, and profitability are ahead of its peers. The company already has liquid cooling material products related to automobiles, new energy vehicles, energy storage, and data centers, which will fully benefit from the demand volume of related industries. The 24-year profit forecast was maintained. Due to strong demand and stronger profit per ton, the 25-year profit forecast was raised (gross margin assumption raised), and the 26-year profit forecast was added. The company's net profit to mother for 24-26 is estimated to be 12.5/16.0/1.90 billion yuan (the original forecast for 25 was 1.50 billion yuan), corresponding to PE 15/12/10 times, maintaining the purchase rating.

Risk warning: product processing costs fall; Chongqing base construction falls short of expectations; international trade frictions