Event: The company released its 2024 three-quarter report. 24Q1-3's revenue was 39.186 billion yuan, up 31.67% year on year; net profit to mother was 3.82 billion yuan, up 52.49% year on year; net profit after deducting non-return to mother was 3.68 billion yuan, up 48.81% year on year. Looking at a single quarter, 2024Q3's revenue was 14.538 billion yuan, up 20.24% year on year, up 9.39% month on month; net profit to mother was 1.3 billion yuan, up 31.42% year on year, -3.99% month on month; net profit after deducting non-return mother was 1.29 billion yuan, up 31.58% year on year, up -4.32% month on month. It is in line with the performance forecast range.

Due to 2024Q3, the company's net profit to mother declined slightly from month to month. On a month-on-month basis, the main profit increases: income tax (+0.076 billion yuan), minority shareholders' profit and loss (+0.094 billion yuan). Major profit deductions: gross profit (-0.162 billion yuan, mainly due to falling prices of electrolytic aluminum and rising alumina), fees and taxes (-0.038 billion yuan), and other/investment income (-0.024 billion yuan).

The utilization rate of electrolytic aluminum production capacity increased dramatically, and profit per ton declined slightly. Volume: The utilization rate of the company's electrolytic aluminum production capacity increased dramatically in the third quarter, achieving full production capacity, and maintaining full production of alumina. 24Q1-3 produces 1.0732 million tons of alumina and 2.148 million tons of electrolytic aluminum. Looking at a single quarter, 24Q3 produced 0.3502 million tons of alumina, a slight decrease of 0.0072 million tons; 0.7973 million tons of electrolytic aluminum, an increase of 0.084 million tons over the previous year, an increase of 0.132 million tons over the previous year (mainly due to the resumption of production in June 2023, which was only completed in August). Price & benefit: The price of aluminum in the 24Q3 market is -975 yuan/ton, alumina +212 yuan/ton, pre-baked anode -183 yuan/ton, and electricity prices in the Yunnan market fell month-on-month due to the beginning of the flood season. It is estimated that the company's Q3 pre-tax profit for electrolytic aluminum decreased by 567 yuan/ton month-on-month to 2,150 yuan/ton (including upstream alumina and pre-baked anode profits).

The balance sheet has been further optimized. The company's long-term loans in Q3 decreased by 1.48 billion yuan compared to Q2 to 2.27 billion yuan, and the balance ratio fell to 25%. Q3 Monetary capital was 8.2 billion yuan, an increase of 1.42 billion yuan over the previous month, the highest value since listing. The company plans to use its own funds to carry out capital protected cash management business to improve the efficiency of the use of the company's capital, revitalize surplus funds, and reduce financial expenses.

Core highlights: 1) High performance flexibility. The company's electrolytic aluminum production capacity is 3.05 million tons, and the company's 2024 equity output is expected to exceed 2.3 million tons. The cost is relatively low and the production capacity is high, and the company's performance is flexible. 2) Balance sheet optimization, full release of performance. With the improvement in profits and the end of capital expansion, the company's balance sheet, income statement, and cash flow statement were clearly optimized. The company's deductions in 2021 were sufficient, and the release of the results in 2022 to 2023 proved that the company can go to battle lightly in the future, and the company's future performance is guaranteed. 3) Under the “dual carbon” goal, the value of green aluminum is highlighted. Europe has established carbon tariffs on imported goods. According to Europe's carbon tariff policy, green aluminum can be exempted from carbon tariffs in the future, and in the domestic “double carbon” context, it is imperative for the electrolytic aluminum industry to be included in carbon trading. The green aluminum premium will be reflected. The company's electrolytic aluminum is all located in Yunnan, and the valuation is expected to increase.

Investment advice: The company's electrolytic aluminum equity production capacity is high, and the future value potential of green aluminum is high. We expect the company to achieve net profit of 4.969 billion yuan, 5.477 billion yuan, and 6.095 billion yuan in 2024-2026. The corresponding PE price is 10, 9, and 8 times, respectively, to maintain the “recommended” rating.

Risk warning: Demand for electrolytic aluminum fell short of expectations, production limits in Yunnan exceeded expectations, and the inclusion of the electrolytic aluminum industry in carbon trading fell short of expectations.