Net profit returned to mother in '23 was +14% compared to the same period, and the dividend ratio increased to 30%. The company achieved operating income/net profit of 26.8.5/4.56 billion yuan in 23 years, +0.2%/14.4% year-on-year, after deducting non-net profit of 4.34 billion yuan, +12.3% year-on-year. The company's total profit was 5.85 billion yuan, +4.8% year-on-year, of which the three major businesses of coal/electric/electrolytic aluminum were 41.8/5.5/1.12 billion yuan respectively, +30.6%/-6.3%/-37.1% year-on-year, accounting for 71%/9%/19%, respectively, and +14.1/-1.1/-12.8pct. The company plans to pay a cash dividend of 0.68 yuan per share in '23, with a dividend ratio of 33% (28% in '22). Based on the closing price on April 30, the dividend rate is 3.6%.

Coal: The volume and price of coal have risen sharply in 23 years, and profits are expected to remain high. 1) Production and sales volume: In '23, the company's coal production/sales volume was 4655/ 46.47 million tons (production capacity 48 million tons), +1.2%/1% year-on-year. 2) Selling price and cost:

The comprehensive sales price/cost of coal in '23 was 204/91 yuan/ton, +11.6%/-1% year-on-year, and the company's coal price bucked the trend. 3) Profit: The coal business achieved gross profit of 5.25 billion yuan in '23, +25.7% year on year; gross profit margin of 55.4%, +5.7pct year on year. We believe that as the largest coal producer in Mengdong and the Greater Northeast region, the company has stable product quality, mature sales and service systems, and coal profits are expected to remain high.

Electricity: The gross profit of new energy generation surpassed that of coal power generation in 23, and the proportion of installed capacity of new energy generation and green electricity continued to rise steadily. In '23, the company's coal power generation/sales volume was 56.1/5.11 billion kilowatt-hours, -6.0%/-2.4% year-on-year; the average electricity sales price/cost was 0.356/0.269 yuan/kilowatt-hour, -2.8%/+2.7% year-on-year. By the end of 23, the company had put into operation 4.55 GW of new energy power generation. The company generated and sold 31/3 billion kilowatt-hours of electricity in 23, an average year-on-year increase of 22.4%; the average electricity sales price/cost was 0.316/0.147 yuan/kilowatt-hour, -5.4%/-2.1% year-on-year. The increase in gross profit from new energy power generation offset the decline in part of the gross profit of coal power generation. The total gross profit of the power business was 960 million yuan, -4.5% over the same period last year. During the “14th Five-Year Plan” period, the company's new energy installed capacity (7GW planned) and green electricity ratio are expected to increase dramatically, becoming another support point for the company's profit growth.

Electrolytic aluminum: The fall in aluminum prices led to a decline in performance in 23 years, which has significant advantages in the long run. Huo Meihongjun, the holding subsidiary of the company (holding 51% of the shares), has an electrolytic aluminum production capacity of 860,000 tons. The production and sales volume of electrolytic aluminum in '23 was 87.5/877,000 tons, +1.3%/1.8%, and the unit sales price/cost was 16312/13,975 yuan/ton, -6.6%/-2% year-on-year. The cost reduction was mainly due to the cost of raw materials per ton of aluminum -7.5%. Huo Mei Hongjun's net profit in '23 was 890 million yuan, or -37.8% year-on-year, mainly due to falling aluminum prices; in '23, the company's net profit per ton of aluminum was 1,011 yuan/ton, or -38.9% year-on-year. We believe that the Inner Mongolia region, where the company is located, has advantages in coal, electricity and aluminum industry chain integration and electricity costs, and is gradually speeding up the pace of smart factory construction. In the context of the centralized greening of the electrolytic aluminum industry and further optimization of the industrial layout, the company's electrolytic aluminum business advantages will become more obvious.

Profit forecasting and valuation. We believe that the company's strong coal and aluminum business is expected to continue, and the new energy power generation project is expected to open up room for growth. The company's net profit from 24 to 26 is 56/58.4/6.08 billion yuan, corresponding EPS is 2.5/2.6/2.71 yuan. Referring to comparable coal, electrolytic aluminum and new energy operating companies, the company will be given 9 to 10 xPE in 24 years, corresponding to a reasonable value range of 22.49 to 24.99 yuan, maintaining a “superior to the market” rating.

Risk warning. Demand fell sharply, and the commissioning of new construction projects fell short of expectations.