Incident: The company announced its quarterly report, achieving revenue of 8.223 billion yuan, a year-on-year decrease of 13.57%; net profit to mother of 1,091 billion yuan, a year-on-year decrease of 29.47%; after deduction, it was 1,013 billion yuan, a year-on-year decrease of 34.24%.
The decline in coal business prices and sales has dragged down the company's performance. 1) Coal: The average mining price of 2024Q1 Yongcheng anthracite was 1215.74 yuan/ton, down 36.20% year on year; the average price of poor coal truck boards in Henan was 734.59 yuan/ton, down 28.03% year on year; according to the company's quarterly report, production, sales and prices of Q1 coal products dropped sharply, causing the profitability of the company's coal products to decline. 2) Electrolytic aluminum: The average price of aluminum ingots in 2024Q1 was 19054.55 yuan/ton, an increase of 3.47% over the previous year. Considering the company's stable production of electrolytic aluminum, profits are guaranteed for the first quarter and the whole year. 3) The battery foil project is progressing in an orderly manner: The leading product of the first phase of the Shenhuo New Materials project is high-precision electronic electrode aluminum foil. Currently, Shenhuo New Materials has completed IATF16949 automobile quality management system certification; the second phase of the new energy power battery material project is progressing smoothly. The first rolling mill began commissioning with materials in February 2024. It is expected that all 8 rolling mills will be put into operation in August 2024.
Looking ahead to 2024, the electrolytic aluminum and coal industry is likely to have a tight balance between supply and demand, and prices are not pessimistic. 1) Electrolytic aluminum: On the one hand, domestic production capacity is close to the “ceiling” of production capacity, and the current capacity utilization rate is at an all-time high, and there is limited room for subsequent construction and operation capacity growth; on the other hand, overseas projects are constrained by problems such as energy issues, increasingly stringent ESG requirements, and inadequate infrastructure matching. Existing projects are easily discontinued and difficult to resume production. New construction projects are progressing slowly, and there is limited room for supply-side expansion. Steady growth in demand compounded by slow supply release. It is expected that the domestic electrolytic aluminum supply and demand market is likely to maintain a “tight balance” in 2024, and aluminum prices will continue to be high. 2) Coal: The company's main types of coal are anthracite and poor coal, all of which are high-quality metallurgical coal, mainly used for blast furnace injection and coking coal blending. The demand situation is highly correlated with the steel metallurgy industry. According to the Metallurgical Industry Planning and Research Institute, China's steel demand will slow down, and at the same time, driven by steel export demand, demand for coal for steel metallurgy will stabilize. Taking into account the supply-side and demand-side situation, it is expected that overall coal supply and demand will be relatively balanced in 2024. Prices in the coal market are likely to be stable and fluctuate slightly. Among them, coking coal benefits from economic recovery, and prices are expected to rise moderately.
Profit forecast: We expect the company's EPS to be 2.73, 2.85, and 2.96 yuan respectively in 2024-2026, and PE will be 8, 8 times, and 8 times, respectively, maintaining a “buy” rating.
Risk warning: Demand for coal and aluminum falls short of expectations, supply-side disturbances; large fluctuations in raw material prices, etc.