Incidents:
The company released its report for the first quarter of 2024. In the 2024 Q1, it achieved operating income of 11.358 billion yuan, an increase of 20.28% over the previous year, and net profit to mother of 1,164 billion yuan, an increase of 31.53% over the previous year.
Electricity supply has improved, and the company's production is expected to resume
In the first quarter of 2024, the company produced 365,600 tons of alumina, up 2.16% year on year; produced 198,400 tons of carbon products, up 2.76% year on year; produced 636,900 tons of raw aluminum, up 23.3% year on year; produced 278,500 tons of aluminum alloy and aluminum processing products, up 6.03% year on year. With the arrival of the abundant water season in the second quarter and the increase in the amount of new energy generation, the tight electricity supply situation in Yunnan Province is expected to ease.
The company expects to produce about 2.7 million tons of electrolytic aluminum in '24, an increase of 300,000 tons over 2023.
Profits have improved, and the cash dividend ratio has increased
24 Q1 The average price of the company's main product, electrolytic aluminum, was 1,9047 yuan/ton (tax included), up 3.1% year on year. The main cost: the average price of anode was 3,905 yuan/ton (tax included), down 35.2% year on year, and the average price of alumina was 3,349 yuan/ton (tax included), up 14.6% year on year. Since '19, the supply and demand pattern of the electrolytic aluminum industry has improved, and the company's debt ratio has declined and profitability has increased. The company's debt ratio in '23 was 25.6%, down 42.63 percentage points from '19; the company's net interest rate in '23 was 11.06%, up 8.81 percentage points from '19. As profits improved and capital expenditure decreased, the company's cash dividend ratio increased, and the dividend payment rate for 23 was 20.16%.
The first domestic brand of Ludian Aluminum, which is expected to enjoy a sales premium
The company is the largest manufacturer of green power aluminum in China. Relying on Yunnan's abundant green power resources, the company's green electricity accounted for about 80% in '23. In the future, with the domestic inclusion of electrolytic aluminum in the scope of carbon trading, we expect the company's cost side to be relatively less affected by carbon trading. As the EU imposes carbon tariffs on imported aluminum products and downstream demand for LVD products increases, we expect the company's LVEN ALUMINUM products to enjoy premium prices. Furthermore, the company is vigorously promoting the “alloying” strategy, which will help reduce the impact of production cuts during the dry season on production.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 494/515.53.6 billion yuan, up 15.88%/4.18%/4.05% respectively; net profit to mother will be 45.6/49.6/5.02 billion yuan, respectively, up 15.3%/8.8%/1.2%; EPS will be 1.31/1.43/1.45 yuan respectively. We gave the company 14 times PE in 2024, with a target price of 18.41 yuan, maintaining a “buy” rating.
Risk warning: risk of product price fluctuations; increased costs of major raw materials; production falls short of expectations.