Event: On October 23, 2024, the company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 21.81 billion yuan, an increase of 10.54% year on year; net profit of 4.4 billion yuan to mother, an increase of 22.73% year on year; net profit after deducting non-return to mother of 4.284 billion yuan, an increase of 22.96% year on year.

24Q3 profit increased sharply year on month, the rate during the period decreased year on month, and the balance of special reserves increased dramatically.

In the third quarter of 2024, the company achieved operating income of 7.683 billion yuan, up 17.81% year on year, up 13.28% month on month; net profit of 1.455 billion yuan, up 45.26% year on year, up 45.55% month on month; net profit after deducting non-return to mother of 1.405 billion yuan, up 46.68% year on year and 45.61% month on month. The total of the 24Q3 company's four fees was +0.31/+0.022 billion yuan, respectively, and the rate was -0.18/-0.17pct month-on-month. Of these, only the financial rate increased, +0.02/+0.06pct, respectively. Sales, management, and R&D rates all declined month-on-month.

By the end of 24Q3, the company's special reserve balance had increased by 0.303 billion yuan to 0.346 billion yuan compared to the beginning of the year, a significant increase of 701.31%.

24Q3 Electrolytic Aluminum's profit increased year over year and declined month over month. The profit and loss of the company's minority shareholders is mainly composed of Huo Meihongjun, with a minority shareholder holding ratio of 49%. In 24Q3, the profit and loss of minority shareholders of the company was 0.134 billion yuan, up 4.98% year on year and down 47.26% month on month. According to Wind data, the 24Q3 China A00 aluminum price was 19562.03 yuan/ton, up 3.84% year on year and down 4.75% month on month. Therefore, we reasonably estimate that the year-on-year increase in aluminum prices led to a year-on-year increase in Huo Meihongjun's profit in a single quarter or a year-on-year increase in the company's profit. The month-on-month increase in performance may be contributed by the coal and electricity business.

It is proposed to invest in the Dongsheng District New Energy Inland Port Decentralized Wind Power Phase II 10MW Wind Power Project. The company announced that the project was set up in May 2023, and project approval was completed on June 1, 2024. The project plans to install a wind turbine with a stand-alone capacity of 10 MW, with a dynamic investment of 37.9911 million yuan, and a dynamic cost of 3799.11 yuan/kW, which is lower than the benchmark value+adjusted value specified in the group company's “Standard Cost Value per Kilowatt for New Energy Power Plants (2024 Edition)” of 4542.38 yuan/kW. The internal return on project investment finance (after tax) is 5.35%, the payback period (after income tax) is 12.44 years, and the capital finance internal rate of return is 9.48%. In recent years, the company has vigorously developed its new energy business. By the end of 2023, the company's wind power installation scale is about 3.4 million kilowatts, and the PV installed capacity is about 1.05 million kilowatts. The company expects the new energy installed capacity to be put into operation in 2024, and the planned production scale is about 2 million kilowatts in 2025, so the new energy sector can be expected to grow.

Investment advice: Considering the year-on-year increase in the company's aluminum profits, we expect the company's net profit to be 5.469/5.899/6.207 billion yuan in 2024-2026, corresponding EPS of 2.44/2.63/2.77 yuan/share, respectively. The PE multiples of the stock price on October 23, 2024 will be 8/7/7 times, respectively. Maintain a “Recommended” rating.

Risk warning: 1) The price of coal and the price of electrolytic aluminum fell sharply; 2) The progress of the project under construction fell short of expectations.