The company's net profit to mother increased sharply year-on-year in the first three quarters of 2024, and Q3 aluminum's internal and external price differences affected profits. In the first three quarters of 24, the company achieved revenue of 23.66 billion yuan, +21.6% year on year; net profit of 1.41 billion yuan, +21.6% year on year; net profit after deducting non-return to mother of 1.16 billion yuan, +24.9% year on year; gross sales margin of 11.3%, up 0.11 pct year on year; and net sales margin of 5.97%, unchanged year on year.

On a quarterly basis, net profit from 24Q1-Q3 was 0.36/0.71/0.34 billion yuan, respectively, corresponding to +2.4%/+57.7%/-4.7% YoY, +93.9%/+95.6%/-51.8%; net profit without return to mother was 0.27/0.63/0.26 billion yuan, respectively, corresponding to -3.4%/+73.6%/-9.2% YoY, +124.5%/+136%/-58.1%. The volume and price of the company's products rose sharply in the first three quarters of 24 ”. Performance has improved dramatically. However, Q3 aluminum's internal and external price differences are affecting profits, and the strong aluminum boom is expected to increase performance elasticity.

In the first three quarters of 2024, the company's aluminum sheet, strip, and foil sales all achieved positive month-on-month growth, with profitability per ton in Q3 -19.6% year-on-year. In terms of sales, according to the company's announcement, the company achieved 1.087 million tons of aluminum sheet and foil sales in the first three quarters of 2024, which is +18.7% over the same period last year. On a quarterly basis, Q1-Q3 achieved sales volume of 0.34/0.37/0.38 million tons, with sales volume +16%/+21%/+19% YoY and +2.3%/+8.2%/+3.1% month-on-month. In terms of profit, the average net profit per ton of aluminum sheet with foil in the first three quarters of 2024 was 1,299 yuan, +2.5%; Q1-Q3 was 1065/1925/901 yuan, respectively, -12%/+30%/-20%, and +89%/+81%/-53% month-on-month. The company's foreign trade sales price uses the model of aluminum price+processing fee, while Q3 aluminum's internal and external price differences are reducing foreign trade sales profits. In the future, with the rapid development of emerging industries such as the new energy industry and the low-altitude economy, the company's profitability is expected to continue to improve.

The proportion of high value-added products is gradually increasing, and the company continues to expand its business scope horizontally. The company's products cover 47 alloy grades of 1-8 series. Currently, there are more than 200 types of products. The products are widely used in new energy, electronic appliances, UHV transmission and other fields. Currently, the company accounts for about 23% of products in the field of electronic appliances and new energy applications. High-technology, high-value-added emerging industries such as consumer electronics, aluminum for new materials, and energy storage are the company's key development directions in the future. With the completion and commissioning of the company's new construction project, the annual sales volume of the three types of water-cooled plates, power battery cases, and aluminum-plastic film products can reach more than 0.1 million tons.

The import policy for recycled aluminum is boosted, and the company's downgraded use of recycled aluminum is expected to continue to increase, and its competitive advantage is prominent. Recently, six departments including the Ministry of Ecology and Environment issued the “Notice on Matters Relating to Regulating the Import Management of Recycled Copper and Copper Alloy Raw Materials and Recycled Aluminum Alloy Raw Materials”. The notice clearly states that recycled cast aluminum alloy raw materials and recycled pure aluminum raw materials that meet the standards are not solid waste and can be freely imported. This policy is expected to rapidly drive the growth of recycled aluminum production. The company's current production capacity is 1.4 million tons/year. As a leading recycled aluminum company, it will benefit from the profit expansion brought about by the increase in production.

Investment advice: As a leading enterprise in product diversification and recycled aluminum upgrading applications in the domestic aluminum plate and strip processing industry, the company has obvious advantages ahead of the industry in terms of cost control and risk management.

The company's profit declined sharply due to fluctuations in Q3 aluminum's internal and external price differences, so it carefully adjusted its 24-year performance forecast. In the future, the company will rely on the boom in the aluminum industry and cost reduction and efficiency, and we believe that the company's profitability can be further improved. We expect the company to achieve net profit of 1.791, 1.978, and 2.144 billion yuan in 2024-2026, corresponding PE of 9.8/8.9/8.2 times, respectively, to maintain a “buy” rating.

Risk warning: risks such as the risk of fluctuations in raw material prices, the risk of worsening market competition, and the volume of high-value-added products falling short of expectations.