Report summary:

Steady growing aluminum plate with foil faucet. The company was founded in 1997 and listed on A-shares in 2011. It is headquartered in Gongyi, Henan. It is a leading enterprise in the diversification of products and the application of recycled aluminum in the aluminum processing industry. Its products are widely used in many fields such as new energy and electronic appliances.

The growth plan is clear: The company's mid-term target is 2 million tons of aluminum sheet and foil production and 1.4 million tons of recycled aluminum; from January to September 2024, the company will achieve 1.098 million tons of aluminum sales +19%. We expect to achieve aluminum sales of about 1.48 million tons +17% year-on-year in 2024.

Unit profit recovery: The company achieved the highest quarterly revenue and net profit in history in 2024Q2; for 2024H1, we estimated a net profit of 1,495 yuan/ton per ton, an increase of about 40% over the full year of 2023.

Aluminum industry: The upstream supply of processed aluminum materials is mature and stable, and downstream demand continues to develop.

China's aluminum industry: perfect industrial chain, leading the world in production capacity. China's alumina/electrolytic aluminum/aluminum processing material production all ranks first in the world, accounting for about 58%/59%/67% of the global market.

Recycled aluminum trend: raw aluminum production limit+post-urbanization, industrial development accelerated. The application of recycled aluminum in China accounts for about 19% of aluminum production, and there is a significant gap between developed economies; China's raw aluminum production is now close to the upper limit, and there is limited room for growth; the use of aluminum in China's urbanization process after 2000 is about to enter the scrapping cycle, and the supply of scrap aluminum is expected to increase.

Company business: differentiated product structure+extreme cost competitiveness.

Strategic focus: Deeply involved in the aluminum sheet and foil processing process and steadily expanding production capacity. The market share is estimated to increase by about 11% in 2024. The operating quality is high, and downstream demand is strong.

Extreme cost: Self-designed production line technology is leading, depreciation costs are low; operating costs are effectively controlled through multiple channels; Gongyi, Henan, where it is located, has formed an advantage in the aluminum processing industry cluster.

Application of recycled aluminum: It first entered the field of recycled aluminum upgrade applications in 2017. Currently, it has a production capacity of more than 1 million tons, and has significant advantages in business scale and profitability.

Maintain a “buy” rating. The scale of production and sales is expected to grow steadily, and the cost advantage is further consolidated as the application of recycled aluminum is basically maintained. From 2024 to 2026, revenue was 31.7/36.5/40.9 billion yuan, +20%/15%/12% year over year, and net profit to mother was 2/2.3/2.6 billion yuan, +49%/14%/13%, corresponding to PE 8/7/6 times.

Risk warning: raw material price/aluminum price spread at home and abroad/risk of exchange rate fluctuations, risk of market competition, company performance and valuation falling short of expectations.