Event: The company released its 2023 annual report. In 2023, the company achieved operating income of 26.85 billion yuan, +0.20% year-on-year; net profit to mother of 4.56 billion yuan, +14.39% year-on-year; net profit after deduction of 4.338 billion yuan, +12.27% year-on-year. Looking at a single quarter, 23Q4 achieved operating income of 7.12 billion yuan, +2.75% year over month, +9.11% month on month; net profit to mother of 975 million yuan, +34.18% year on month, -2.71% month on month; net profit after deducting non-return to mother of 853 million yuan, +26.57% year over month, and -10.93% month on month. In the first quarter of 2024, the company achieved operating income of 7.34 billion yuan, +7.32% year on year; net profit to mother of 1.94 billion yuan, +20.21% year over year; net profit after deduction of 1.91 billion yuan, +20.84% year on year.
Coal business: Profits bucked the trend and increased significantly in the future. 1) Production and sales volume: In 2023, the company achieved 46.5474 million tons of raw coal production, +1.19% year over year; sales volume of 46.4743 million tons, +1.04% year over year. 2) Price & cost: In 2023, the price of a ton of coal was 196 yuan/ton, +7.4% year over year; the unit cost was 89 yuan/ton, -2.8% year over year. The cost decline was mainly due to the year-on-year decline in divestment fees and freight charges. 3) Gross profit and gross profit margin: In 2023, gross profit per ton of coal was 107 yuan/ton, +17.7%; the coal business achieved gross profit of 4.97 billion yuan, +18.9% year on year; gross margin was 54.5%, +4.78 pct year on year. 4) Future growth: In August 2023, the company obtained approval for an increase of 2 million tons in the southern open pit mine. Production is expected to be achieved in 2025, and there is still room for 1.5 million tons of growth this year and next two years.
In addition to the listed companies' internal coal assets, the group company also has a total production capacity of 35 million tons at Baiyinhua No. 2 and No. 3 mines. Currently, procedures related to land use permits have been completed. The company is actively promoting asset injection, and the company's coal production capacity is expected to increase by another 72.9%. 5) Coal prices increased year on year, and performance bucked the trend: the average lignite price index in Mengdong in Q1 in 2024 was 301 yuan/ton, +1.6% over the same period last year.
Electricity business: The transformation continues to be realized, and green electricity continues to be released. 1) Electricity sold: In 2023, the company achieved 8.70 billion kilowatt-hours of electricity generation, +2.5% year over year; sales volume of 8.16 billion kilowatt-hours, +5.6% year over year. Among them, the thermal power division achieved 5.61 billion kilowatt-hours of power generation, -6.0% year-on-year, and 5.11 billion kilowatt-hours of electricity sales, -2.4%; the new energy division achieved 3.10 billion kilowatt-hours of power generation, +22.4% year over year, and 3.06 billion kilowatt-hours of electricity sales, or +22.4% year over year. 2) Price & cost: In 2023, the price of thermal power is 0.35 yuan, the cost of electricity is 0.27 yuan; the price of green electricity is 0.31 yuan, and the cost of electricity is 0.14 yuan. 3) Gross profit and gross profit margin: In 2023, thermal power generation gross profit was 0.09 yuan, green electricity gross profit was 0.17 yuan; the power business achieved gross profit of 960 million yuan, -2.9% year on year; gross margin was 34.7%, -1.6 pct year on year.
Electrolytic aluminum business: The year-on-year increase in aluminum prices in 24Q1 contributed to elasticity, focusing on future increases. 1) Production and sales volume: In 2023, the company achieved 875,500 tons of electrolytic aluminum production, +1.3% year over year; sales volume of 886,800 tons, +1.8% year over year.
2) Price & cost: In 2023, the company's aluminum products sold for 16,312 yuan/ton, -6.6% year-on-year; unit cost was 13,783 yuan/ton, -3.4% year-on-year. 3) Gross profit and gross profit margin: In 2023, the gross profit per ton of aluminum was 2,529 yuan/ton, -20.7%; the electrolytic aluminum business achieved gross profit of 2.22 billion yuan, -19.3% year over year; gross margin was 15.5%, -2.8 pct year on year.
4) Future growth: The company is vigorously promoting the preparation process for the Zahanur aluminum alloy renewal project (Zalu Phase II). It is estimated that in 2025, the company's electrolytic aluminum production capacity will reach 1.21 million tons, an increase of 350,000 tons over the current level. 5) The price of electrolytic aluminum increased year-on-year, contributing to elasticity: According to Wind data, the average price of aluminum (A00) in Q1 2024 was 1,9047 yuan/ton, +3.2% year-on-year.
Profit forecasting and investment ratings. The profit of the company's main business is relatively steady, and all three major businesses will increase in the future, so I am optimistic about its potential for steady growth in the future. We expect the company's net profit to be 48.5, 53.5, and 5.65 billion yuan in 2024-2026. Based on the market value at the close of April 29, the corresponding PE is 9.6, 8.7, and 8.2 times, maintaining a “buy” rating.
Risk warning: 1) Product prices fell sharply; 2) macroeconomic growth fell short of expectations; 3) The commissioning progress of new projects fell short of expectations.