China Aluminum released its 2024 quarterly report: The company achieved operating income of 48.956 billion yuan, -26.14%, and -1.2% month-on-month; net profit to mother of 2,230 billion yuan, +23.01% year-on-year, +63.45% month-on-month; net profit to mother after deducting non-recurring profit and loss of 2.283 billion yuan, +35.61% year-on-year and +29.57% month-on-month.
Key points of investment
Prices of electrolytic aluminum and alumina rose in the first quarter of 2024, driving the company's profit expansion
The company's production of alumina, raw aluminum and coal increased year-on-year in the first quarter of 2024, and the production of fine alumina and raw aluminum declined month-on-month. However, benefiting from the month-on-month increase in the price of electrolytic aluminum and alumina, the company's profit still achieved significant month-on-month growth.
Volume: The company's metallurgical alumina production has increased. The company produced 4.25 million tons of metallurgical alumina in the first quarter of 2024, +6.78%, +0.95% month-on-month, 990,000 tons of fine alumina, -10.81% year-on-year, -54.17% month-on-month, and 1.78 million tons of primary aluminum (including alloys), +16.34% year-on-year, -4.30% month-on-month, and 2.88 million tons of coal, +6.67%, and -14.29% month-on-month.
Price: Prices of electrolytic aluminum and alumina have risen. In the first quarter of 2024, the average price of A00 aluminum in the Yangtze River Nonferrous Market was 1,9024 yuan/ton, +3.09% YoY, +0.26% month-on-month, and the average price of alumina was 3,338 yuan/ton, +7.80% YoY and +5.82% month-on-month.
Profit: The company's gross margin and net margin increased compared to the same period last year. The company's gross profit margin for the first quarter of 2024 was 15.34%, +6.22pct year on year, -5.62pct; net profit margin was 8.27%, +3.89pct year on year, -0.96pct month-on-month.
The company's four-fee control improved month-on-month in the first quarter of 2024
Expense control improved month-on-month during the company's period in the first quarter of 2024. The company's sales expense ratio for the first quarter of 2024 was 0.19%, +0.04pct year on year, -0.10pct; management expense ratio was 2.05%, +0.66pct year on year, -2.04pct month on month; R&D expense ratio was 1.17%, +0.48pct year on year, +0.09pct month on month; financial expense ratio was 1.42%, +0.19pct year on month, and -0.58pct month on month.
Domestic production of 540,000 tons of electrolytic aluminum has been resumed. There is no new production capacity, and supply continues to be tight
As of April 25, 2024, domestic production of electrolytic aluminum has been resumed by 540,000 tons, production has been reduced by 77,000 tons, and a new production of 0.0,000 tons has been put into operation. According to Baichuan Yingfu, as of April 25, 2024, China's electrolytic aluminum production capacity was 42.531 million tons. In terms of production cuts, the scale of China's electrolytic aluminum production reduction in 2024 involved 2.277 million tons, and production has already been reduced by 77,000 tons. In terms of resuming production, it is expected that a total of 1,565,000 tons of production will eventually be resumed during the year, and 540,000 tons have already been resumed. In terms of additional production capacity, China's electrolytic aluminum has built a new production capacity of 2.98 million tons and is to be put into operation in 2024. It is expected that it will eventually start production of 1.25 million tons in the year.
Profit forecasting
The company's 2024-2026 revenue is estimated to be 2513.71, 264.798, and 276.485 billion yuan, respectively, and net profit to mother is 88.87, 103.01, and 11.892 billion yuan, respectively. The PE corresponding to the current stock price is 14.4, 12.4, and 10.7 times, respectively.
Considering that the company is a leading enterprise in the domestic aluminum industry and the world's largest manufacturer and supplier of alumina and electrolytic aluminum, the Group has a large cost advantage in domestic sales of alumina, and the price of superimposed electrolytic aluminum is expected to continue to rise, we maintain the company's “buy” investment rating.
Risk warning
1) Risk of policy production restrictions; 2) risk of falling prices of major products; 3) risk of fluctuations in raw materials and energy prices; 4) risks such as falling short of expectations in the commissioning of new projects.