Event: The company released its 2023 annual report and 2024 quarterly report. The company achieved revenue of 6.80 billion yuan for the full year of 2023, -11.27% year over year, achieved net profit of 130 million yuan, -65.15% year over year, achieved net profit without return to mother of 140 million yuan, -60.65% year over year, gross sales margin 7.98%, down 2.92 percentage points year on year, and net sales profit margin 1.96%, down 3.02 percentage points year on year. The decline in profits was mainly due to macroeconomic factors. Downstream demand was weak, and sales prices of the company's main products, aluminum alloy ingots, ferrous metals, and non-ferrous metals fell; secondly, the domestic Taicang plant was shut down due to the impact of raw material import policies, which led to a decline in the company's sales volume and profits. The company achieved revenue of 1.58 billion yuan in a single quarter in 2024Q1, -4.99% month-on-month, -9.96% year-on-year, and achieved net profit of 28.65 million yuan to mother, +224.94% month-on-month and -61.27% year-on-year. The company plans to distribute a cash dividend of RMB 28.62 million (tax included), with a dividend payment ratio of 21.53%.
In 2023, the company's volume and price plummeted, and profits declined. In terms of output, in 2023, the company produced 223,000 tons of aluminum ingots, a year-on-year decrease of 9.14%, and the waste trade produced 616,000 tons, an increase of 4.95% year-on-year. In terms of price, in 2023, the company achieved revenue of 3.67 billion yuan, operating costs of 3.52 billion yuan, and gross profit of 157 million yuan, a year-on-year decrease of 62.0%. We calculated that the average sales price of aluminum ingots was 16,494 yuan/ton, down 6.7% from 17,681 yuan/ton in 2022; the unit gross profit was 703 yuan/ton, down 57.6% from 1,661 yuan/ton in 2022.
In 2023, the company's waste trade achieved revenue of 2.66 billion yuan, operating costs of 24.1 billion yuan, and gross profit of 253 million yuan, a year-on-year decrease of 16.4%. We calculated that the average sales price of waste was 4,276 yuan/ton, down 8.5% from 4,672 yuan/ton in 2022; gross profit per unit was 406 yuan/ton, down 18.9% from 500 yuan/ton in 2022.
Malaysia's 1.3 million tons/year aluminum ingot project will strongly increase the company's production capacity. The company's 1.3 million ton aluminum alloy ingot expansion project in Malaysia officially started in October 2021. In 2023, the company will focus on the construction of the “Malaysia annual production of 1.3 million tons of aluminum alloy ingots” project. In the early stages, public health events seriously affected the progress of plant expansion, and was also affected by factors such as the economic downturn and the climate and environment of the country where the project was located. At the same time, in order to improve the economic efficiency of the project, the company optimized and adjusted the original design plan of the project. The overall construction progress has been slowed down, and the current project infrastructure has been completed.
Profit forecast. We expect the company to achieve revenue of 87.7/111.0/16.26 billion yuan in 2024-2026; achieve net profit of 3.5/4.8/770 million yuan, with year-on-year growth rates of +161.2%, +37.0%, and +61.5% respectively; and achieve EPS of 0.16/0.22/0.35 yuan, respectively. As of the close of trading on April 26, 2024, the corresponding 2024-2026 PE was 17.25x, 12.59x, and 7.79x, respectively, maintaining the “gain” rating.
Risk warning: New project construction falls short of expectations; raw material supply-side disturbances lead to rising costs; macroeconomic downside risks.