The company announced 24Q3 results: revenue of 14.538 billion yuan (yoy +20.24%, qoq +9.39%); net profit to mother of 1.301 billion yuan (yoy +31.42%, qoq -3.99%). 24Q1-3's cumulative revenue was 39.186 billion yuan (yoy +31.67%); net profit attributable to mother was 3.82 billion yuan (yoy +52.49%). On a month-on-month basis, the company's production increased further, while the profit per ton of aluminum declined slightly, mainly due to the month-on-month decline in the average price of electrolytic aluminum in Q3.

On a year-on-year basis, the company's production growth supported a year-on-year increase in profits. The company has formed an integrated green aluminum industry layout in Yunnan. At the same time, the hydropower resource card advantage is obvious. At the same time, the increase in production capacity utilization supports a significant year-on-year improvement in performance, maintaining a “buy” rating.

Production increased further in 24Q3, and gross profit per ton declined slightly

In terms of output, the company produced 2.148 million tons of raw aluminum in the first three quarters, with a year-on-year increase of 26.32%. Among them, Q3 production was 0.7973 million tons, up 11.7% month-on-month. Since March of this year, Yunnan's electricity supply has improved markedly and returned to full production around June. The company achieved full production in the third quarter, which led to a further increase in production. In terms of profit, we estimate that the company's gross profit for Q3 tons of aluminum was about 2,477 yuan/ton, down 517 yuan/ton from month to month. Among them, the average price of Q3 aluminum (tax included) was 19,562 yuan/ton, down 975 yuan/ton from month to month, which is the main reason for the decline in profit. In terms of cost, we estimate that the company's production cost per ton of aluminum is about 14,834 yuan/ton, a decrease of 346 yuan/ton over the previous month.

The supply and demand pattern for electrolytic aluminum is good. I am optimistic that the profit per ton of aluminum will remain at a good level in the short term. Demand for aluminum is good during the peak season, and aluminum ingot inventory has remained relatively good. Since September, aluminum prices have continued to rise. The industry's average ton aluminum profit has recovered from around 1,000 yuan/ton in mid-August to around 2,000 yuan/ton in October. In the medium term, domestic electrolytic aluminum production capacity is close to the 45 million ton ceiling, and there is very limited room for supply growth, while the demand side maintains good growth driven by aluminum products such as new energy, UHV, and home appliances. We are optimistic that the supply and demand for electrolytic aluminum will continue to improve, and the profit per ton of aluminum is expected to maintain a good level.

A target price of $20.59 was given, maintaining the “Buy” rating

Considering the relatively good electricity supply situation in Yunnan, the company's capacity utilization rate continues to rise. We raised our production expectations. We expect the company's EPS to be 1.51/1.79/1.99 yuan (previous value 1.42/1.58/1.68 yuan), which is 9.8 times the average value of the company's PE (2025E). Considering the company's hydropower aluminum card position advantage, the company was given a PE valuation of 11.5 times in 25 years, corresponding to a target price of 20.59 yuan (previous value 17.04 yuan) to maintain the “buy” rating.

Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate greatly, and capacity release falls short of expectations.