Operating performance increased significantly month-on-month, and net profit to mother increased significantly

24H1 achieved operating income of 13.785 billion yuan, -6.83% year over year; realized net profit of 20.70.4 billion yuan, +103.45% year over year; realized net profit of 1.961 billion yuan without return to mother, +168.42% year over year. 24Q2 achieved operating income of 6.96 billion yuan, -11.36% YoY, +1.97% month-on-month; realized net profit of 1.354 billion yuan, +161.47% YoY and +88.06% month-on-month. The sharp increase in the company's performance is mainly due to the rise in the price of electrolytic aluminum. Furthermore, due to the company's high degree of integration of raw materials, the cost control of each raw material is better.

Higher aluminum prices+lower costs have led to a significant increase in profits.

1) Electrolytic aluminum: 24H1 produced 0.5854 million tons, +1.3% YoY. Profits in the electrolytic aluminum sector increased significantly, and gross profit increased from 1.764 billion yuan in 23H1 to 2.156 billion yuan in 24H1, +22.21% year-on-year, mainly due to price increases combined with cost reductions. The average price of 2024H1 SHFE aluminum was 0.0199 million yuan/ton, +7.60% year over month, +5.75% month on month; although the raw material price of alumina increased sharply, the company's Guangxi alumina profit offset the increase in costs. Furthermore, the average price of petroleum coke 24H1 was 2132.37 yuan/ton, -32.52% year over year and -19.79% month on month, which led to a certain cost reduction.

2) Alumina: 24H1 produces 1.093 million tons, +6.8% over the same period. Guangxi alumina is mainly exported. In terms of quantity, alumina can basically supply electrolyzed aluminum on its own. 24H1 The average spot price of alumina in China was 3510.95 yuan/ton, +21.15% year over year and +19.25% month over month. Alumina operator Jingxi Tiangui contributed about 0.55 billion to net profit, and the sector's performance increased significantly over the same period last year.

3) High-purity aluminum: 24H1 high-purity aluminum produced 0.016 million tons, or -25.6%. High-purity aluminum producer Tianzhan New Materials made a profit of 21.12 million yuan in the first half of the year, contributing relatively little to profits.

4) Others: Tianyu Limited, a wholly-owned subsidiary of the company, was awarded the “National High-tech Enterprise” in 2023. It paid corporate income tax at a 15% tax rate and enjoyed the value-added tax credit policy for advanced manufacturing enterprises, which contributed positively to the first half of the year's results. In addition, 24H1 had non-recurring profit and loss of 0.113 billion yuan, mainly due to receiving government subsidies of 0.135 billion yuan in the first half of the year.

Investment advice: With the development of new domestic incremental measures and inventory policies, compounded by supply-side constraints, the supply and demand situation for electrolytic aluminum is expected to remain relatively good. Considering the significant rise in the price of electrolytic aluminum in Q2, we revised the company's net profit to mother for 24/25/26 from 3.63/4.12/4.35 billion yuan. The estimated net profit to mother for 24-26 is 3.718/4.458/4.706 billion yuan, corresponding PE is 9/7/7 times, maintaining the “buy” rating.

Risk warning: risk of overseas operations; risk of fluctuations in raw materials and energy prices; risk of macroeconomic fluctuations.