Event: The company released its 2024 semi-annual report. In the first half of 2024, revenue was 13.785 billion yuan, -6.83% YoY; net profit to mother was 2.074 billion yuan, +103.45% YoY. Among them, 2024Q2 achieved operating income of 6.96 billion yuan, -11.36% year-on-year, and +1.97% month-on-month; net profit to mother of 1.354 billion yuan, +161.47% year-on-year, and +88.06% month-on-month.

Electrolytic aluminum and alumina prices operate at high levels, and the advantages of industrial chain integration have helped to increase profits dramatically. 1) Strong performance in 2024H1 aluminum prices and alumina prices: 2024H1 SMM aluminum average price 0.0198 million yuan/ton, +7% year over year; SMM Guangxi alumina average price was 3,529 yuan/ton, +25% year over year. Reflected in the average sales price of the company's products, the sales price of electrolytic aluminum and alumina products was +6.7% and +26.1% year-on-year.

2) 2024H1 electrolytic aluminum production was stable year on year, and alumina production was released at an accelerated rate: the company produced 0.5854 million tons of aluminum ingots, +1.3% year over year; alumina benefited from rising production capacity, with output of 1.093 million tons, +6.8% year over year, and sales volume +4% year over year. 3) The self-sufficiency advantage of alumina is highlighted, cost rigidity, and full price increase flexibility: 2024H1's gross profit of the electrolytic aluminum sector was 2.16 billion yuan, +22.2% compared to the same period last year; the gross profit of the alumina sector was 0.76 billion yuan, only 0.024 billion yuan in the same period last year; the gross profit of the self-produced electrolytic aluminum+alumina sector totaled 2.91 billion yuan, +63% over the same period last year, fully benefiting from the price increase in the electrolytic aluminum and alumina sector. 4) Preferential corporate income tax rates further amplify performance flexibility: At the end of 2023, Tianlu Co., Ltd., a wholly-owned subsidiary of the company, was awarded the “National High-tech Enterprise” and enjoyed a 15% corporate income tax rate.

The resource-side and deep-processing layout are gradually deepening, consolidating the advantages of integration. 1) On the resource side, the alumina production capacity in Guangxi has obtained supporting bauxite resources and is advancing exploration; the 6 million ton bauxite project in Guinea has entered the mining stage and is about to be shipped domestically; the Indonesian bauxite project is undergoing exploration; 1 million tons of alumina phase I in Indonesia is undergoing EIA, land acquisition, etc.; 2) On the deep processing side, the battery aluminum foil project continues to advance. The company's Shihezi aluminum foil blank production line has been commissioned and is about to be produced on a large scale. The Jiangyin aluminum foil deep processing project is undergoing equipment installation and commissioning, and is gradually being put into production.

Profit forecast and investment advice: Considering the strong performance of aluminum prices and alumina prices during the year, we raised the company's net profit forecast for 2024 to 2026 to 4.527, 4.753, and 4.923 billion yuan (previous values were 3.653, 4.309, and 4.362 billion yuan, respectively). The company's cost competitiveness is strong under the integrated layout of the industrial chain. In the future, it may fully benefit from rising aluminum prices and maintain an “gain” rating.

Risk warning: demand falls short of expectations, project progress falls short of expectations, valuation model falls short of expectations, etc.