T All AB Production_S Chain UMB Bureau A, ry] China Hongqiao, a highly self-sufficient high-quality aluminum company, began to engage in the aluminum product business in 2006; established a winning alliance in Guinea with Singapore's Welly International Group, Yantai Port, and Guinea UMS Company to establish a mining company and port company to transport bauxite from Guinea to the country; in 2019, the production capacity of electrolytic aluminum was moved from Shandong to Yunnan to use energy advantages to build 2.03 million tons of hydropower and aluminum projects. At present, the company has become a very large enterprise in the entire aluminum industry chain integrating thermoelectricity, mining, alumina, liquid aluminum alloys, aluminum alloy ingots, aluminum alloy cast and rolling products, aluminum busbars, high-precision aluminum sheets and foils, and new materials. The company's operating revenue/net profit to mother in 2023 was 1336.24/11.461 billion yuan respectively, +1.46%/+31.7% year-on-year respectively. Thanks to rising aluminum prices in 2024, the company's performance is expected to continue to rise.
Bauxite supply is disrupted, and aluminum prices tend to rise or fall when supply and demand are mismatched
On the raw material side, domestic environmental protection production restrictions, maintenance production cuts, and declining quality have led to a continuous increase in dependence on bauxite imports, and the stable supply capacity of subsequent raw materials will become one of the competitiveness of aluminum companies; on the supply side, illegal domestic electrolytic aluminum production capacity has been shut down one after another, and the medium- to long-term production capacity limit is currently controlled at 45 million tons. New production capacity all need to replace the original production capacity index, and supply increases; supply and demand increases; demand for aluminum in the automotive and photovoltaic industries contributes to the continued rise in demand.
Forward-looking layout of overseas resources, highlighting the advantages of integration
On the raw material side, as an important sponsor of the Win Alliance, the company's project in Guinea stabilized 50 million tons of annual bauxite production capacity by the end of 2023, and the company had built alumina production capacity domestically (17.5 million tons) and Indonesia (2 million tons); in terms of electrolytic aluminum, the company had 6.46 million tons of electrolytic aluminum production capacity, of which 2.03 million tons have already been relocated from Shandong to Yunnan and put into operation. Yunnan Honghe's low-carbon aluminum project with an annual output of 1.93 million tons has also officially started. The company used Yunnan's hydropower advantages to reduce the cost of electrolytic aluminum production, profitability is expected Further optimization. In terms of aluminum processing, the company lays out products such as aluminum foil, cans, and aluminum alloy wheels to expand high-quality customers at home and abroad.
Investment advice
The company is a leading enterprise in the domestic aluminum industry. The entire industry chain is highly self-sufficient, and is expected to benefit from rising aluminum prices and the release of integrated advantages. We expect the company's net profit to be 144.97/163.93/18.093 billion yuan respectively in 2024/2025/2026, corresponding to PE 6.9/6.1/5.5 times, respectively, which is the first time that coverage gives a “buy” rating.
Risk warning
Global bauxite supply has stabilized; costs of soda ash, electricity, etc. have fluctuated greatly; downstream demand falls short of expectations, etc.