Incident: The company announced that 2024H1 achieved net profit of 2.4-2.6 billion yuan, a year-on-year increase of 58.42%-71.62%; after deduction, it was 2.3-2.5 billion yuan, an increase of 54.29%-67.71% year-on-year.
Capacity utilization increased and prices rose sharply, and the performance significantly exceeded expectations. According to the company announcement, we achieved net profit to mother of 1.386 billion yuan in the 2024Q2 single quarter, an increase of 120.00% year on year; 1.365 billion yuan after deduction, a year-on-year increase of 123.40%, according to the median calculation (net profit of 2.5 billion yuan after deduction), which significantly exceeded market expectations. According to the company's announcement, the main reasons for the high growth were: 1) the company strengthened communication with the power management department to actively seek electricity consumption, accelerate the resumption of production of electrolytic aluminum production capacity, and achieve a significant increase in the electrolytic aluminum production capacity load rate; 2) the company firmly grasped the market opportunities of rising aluminum prices (according to iFind data, the closing prices of LME aluminum futures in April, May, and June 2024 (3 months) were 2528.48, 2615.45, and 2549.53 US dollars/ton, respectively. Continuing to increase marketing efforts and actively explore the market, the company's production and sales of aluminum products increased sharply year on year, and business performance increased year on year.
Company α: Strong quantitative increase certainty (elasticity) +report quality improvement (dividends) +green power resource advantage. The market believes that the company is a beta type. Following the rise and fall of aluminum prices, we believe that the company has strong alpha: aggressive, the price of electrolytic aluminum rises and falls easily, the company has strong certainty in volume growth and sufficient performance flexibility; it can be maintained, balance sheet repair+report quality improvement, and shareholder returns can be expected to be increased. 1) The electrolytic aluminum industry is highly concentrated, and future volume increases are mainly due to mergers and acquisitions; under the circumstances where the entire industry's output is relatively rigid, the company's 2024 electrolytic aluminum production target will increase by 12.52% compared to 2023. The performance is flexible enough, and the increase is invaluable.
2) In 2018-2023, the company's balance sheet was repaired, and the report quality was significantly improved, and its profitability was significantly improved, and it has the ability to increase dividend ratios and shareholder returns; at the same time, central enterprises include market value management assessment targets in the performance evaluation index system. We expect the company to strengthen shareholder returns and increase dividend ratios worth looking forward to; 3) Under the dual carbon target, green aluminum is an inevitable trend and direction for the development of the electrolytic aluminum industry. Relying on the advantages of Yunnan Province's rich green power resources, the brand and economic value will be further enhanced.
Profit forecast: In 2024-2026, we expect the company's EPS to be 1.40, 1.52, and 1.64 yuan, respectively, and PE will be 10, 10, and 9 times, respectively, maintaining a “buy” rating.
Risk warning: Downstream demand and projects under construction fall short of expectations, disturbances in raw materials, deterioration of the competitive landscape, etc.