Incident: The company released the May 2024 business report, and the production and sales of aluminum sheet and foil reached a record high. In terms of production. ① Single month: The company produced 127,200 tons of aluminum sheet and foil in May 2024, a record high, up 22.7% year on year and 3.3% month on month; produced 0.17 million tons of aluminum profiles, an increase of 13.3% year on year. ② Cumulative: From January to May 2024, the company produced 595,000 tons of aluminum sheet and foil, an increase of 18.6% over the previous year; it produced 0.84 million tons of aluminum profiles, an increase of 12.0% over the previous year. In terms of sales. ① Single month: The company sold 129,400 tons of aluminum sheet and foil in May 2024, a record high, up 21.5% year on year and 3.4% month on month; sold 0.14 million tons of aluminum profiles, up 27.3% year on year. ② Cumulative: From January to May 2024, the company sold 594,300 tons of aluminum sheet and foil, an increase of 18.9% over the previous year; it sold 0.71 million tons of aluminum profiles, an increase of 18.3% over the previous year.
Aluminum prices rebounded steadily in the first quarter, and fluctuated higher in the second quarter. According to Changjiang Nonferrous Metals Network data, as of June 3, 2024, the average price of 2024Q2 spot aluminum reached 20,518 yuan/ton, an increase of 7.7% over 2024Q1, while the average price of spot aluminum in 2024Q1 was 19054 yuan/ton, an increase of 0.5% over 2023Q4. Spot aluminum prices continued to rise, mainly due to the severe situation overseas, which boosted external aluminum prices, compounded by the continuous issuance of macroeconomic policies by the country to boost consumption.
Overseas, Rio Tinto Group's alumina shipments at Yarwun Smelter in Australia and Queensland Alumina Co., Ltd. have been blocked, and there is a shortage of overseas alumina supply, supporting the price of external aluminum. Domestically, China continues to announce economic boosting policies, such as abolishing purchase restrictions in many cities, etc., and the overall price of Shanghai aluminum is rising.
The long-term planned production and sales scale reached 2 million tons, and the application of recycled aluminum upgrade continues to increase. The company has 9 wholly-owned subsidiaries, 2 holding subsidiaries, 2 wholly-owned subsidiary companies, and 3 shareholding companies. It currently has production bases in Gongyi, Zhengzhou, Xingyang, Dongguan, Kunshan, and G****, South Korea. Sales volume of aluminum sheet and foil rapidly expanded from 310,000 tons in 2012 to 1.25 million tons in 2023, and the company's recycled aluminum upgrade application capacity has reached 1 million tons. With the gradual commissioning of 700,000 tons of new green aluminum alloy material production capacity in the Jianyirui New Materials Project, the company's production and sales scale can reach 2 million tons, and the production capacity for recycled aluminum upgraded applications will reach 1.4 million tons.
Profit forecast. Based on processing costs and the company's long-term production and sales targets, we expect the company's revenue for 2024-2026 to be 339/383/38.5 billion yuan, respectively, with net profit of 14.7/16.5/1.67 billion yuan, corresponding EPS of 1.18//1.32/1.34 yuan, and the PE corresponding to the closing price on June 3, 2024 being 10.41x/9.28x/9.17x, respectively, to maintain the “buy” rating.
Risk warning: Projects under construction have fallen short of expectations; downstream demand has fallen short of expectations; aluminum processing costs have dropped dramatically.