The company released the 2023 report and the 2024 quarterly report. The company's 2023 revenue was 37.625 billion yuan, -11.89% year on year, net profit to mother was 5.905 billion yuan, -22.07% year on year; 24Q1 revenue was 8.223 billion yuan, -13.57% year on year, and net profit to mother was 1,091 billion yuan, -19.47% year over year.
Aluminum sector: along with the rise in aluminum prices, optimization of profitability
In 2023, the company's revenue of electrolytic aluminum was 25.294 billion yuan, -10.49% year on year. The decline in the profitability of the company's main products was mainly due to falling aluminum prices. The average price of spot aluminum in the Yangtze River in 2023 was 18696.74 yuan/ton, -6.22% year on year. The company's electrolytic aluminum price decreased by 945.32 yuan/ton year on year. In terms of volume, the company was affected by the production reduction of 92,700 tons by its subsidiary Yunnan Shenhuo in 2023. The production/sales volume of electrolytic aluminum was 151.80/1,5273 million tons, respectively, -7.16%/-6.07% compared with the same period last year. In 24Q1, the average price of spot aluminum in the Yangtze River was 19050.86 yuan/ton, +0.45% month-on-month. As aluminum prices rise, the profitability of the company's aluminum sector is expected to continue to be optimized in 2024.
Coal sector: Industry performance is under pressure under pressure. Liangbei Coal Mine is expected to contribute 8.012 billion yuan to the company's coal revenue in 2023, -18.92% year-on-year. Pressure on coal prices is the main factor dragging down the company's performance. Price: In 2023, due to the easing of supply and demand due to a significant increase in imported coal volume, the average domestic coal price fell to 980.60 yuan/ton. During the same period, the average price of the company's coal fell 284.42 yuan/ton year on year. Volume: In 2023, the company's coal production/sales volume was 716.96/7.2477 million tons respectively, +5.25%/+7.41% compared with the same period last year. Coal production ranked fourth in Henan Province. The company gave full play to its location advantages to expand capacity and production. The Liangbei coal mine expansion and renovation project continued to advance, and coal production capacity increased steadily.
According to the announcement, the 24Q1 coal company safety incident and stricter regulatory policies affected the company's coal production and sales. It has returned to normal levels since April, and is not expected to affect the implementation of the annual production plan. In terms of price, the average domestic coal price in 24Q1 was 1005.64 yuan/ton, -5.02% year-on-year. Pressure on coal prices affected the first quarter results. Taking into account the supply-side and demand-side situation, it is expected that the overall coal supply and demand will be relatively balanced in 2024, and the coal market price is likely to be stable and fluctuate slightly.
Expected release of aluminum foil production capacity and promotion of integrated layout
The company's electric aluminum foil project is progressing steadily, and production capacity has been released one after another: the overall installed level of the first phase of the Shenhuo New Materials Battery Foil project has reached the international advanced level, and the second phase of the new energy power battery materials project is progressing smoothly. The first rolling mill began commissioning with materials in February 2024, and it is expected that all 8 rolling mills will be put into operation in August 2024. Yunnan New Materials also has a production capacity of 110,000 tons. It is divided into two phases: billet and battery foil. The total investment of the project is estimated to be 2.4 billion yuan. Currently, construction of the first phase of the blank project has already started, and construction of the second phase of the battery foil project will proceed according to market conditions. The company will produce 80,900 tons of aluminum foil in 2023, and plans to produce 97,500 tons of aluminum foil in 2024. Through active mergers and acquisitions and project investment, the company continues to deepen its integrated layout upstream and downstream of the industrial chain, and its performance is expected to continue to improve.
Investment advice
We expect the company's net profit to be 63.03/69.85/7.256 billion yuan in 2024-2026 respectively (the previous value was 67.59/7.288 billion yuan in 2024-2025, respectively, taking into account the decline in coal prices), and the corresponding PE is 7.8/7.0/6.8 times, respectively, maintaining the “buy” rating.
Risk warning
The risk of a sharp drop in coal and aluminum prices; production capacity investment falls short of expectations, etc.