Mingtai Aluminum released its three-quarter report: Q3 achieved revenue of 8.341 billion yuan (yoy +22.37%, qoq +2.61%) and net profit of 0.341 billion yuan (yoy -4.65%, qoq -51.77%). Q1-Q3 2024 achieved revenue of 23.655 billion yuan (yoy +21.59%), net profit to mother of 1.411 billion yuan (yoy +21.58%), after deducting non-net profit of 1.162 billion yuan (yoy +24.85%). In anticipation of a return to high demand for aluminum, we believe that the company's 24-year performance may maintain a high growth rate and maintain a “buy” rating.

The company's gross margin for the third quarter decreased by 4.22 pcts month-on-month, and expenses rose 1.41 pct month-on-month. According to the company's monthly operating report, the company's 24Q3 aluminum sheet, foil, and aluminum profile sales were 0.3791/0.0031 million tons, respectively, with a total output of 0.3717 million tons (yoy +18.3%, qoq +2.8%). The company's 24Q3 gross margin was 9.39%, -4.22pct month-on-month. We think it may be mainly due to a drop in aluminum prices and a mismatch of costs. In terms of expenses, the company's 24Q3 total cost rate was 6.77%, (yoy+0.45pct, qoq+1.41pct).

Of these, 24Q3 R&D cost was 0.461 billion yuan, and QoQ +16.79%, which was the main cost increase. In terms of dividends, the company announced the profit distribution plan for the first three quarters: it plans to distribute cash of 0.50 yuan (tax included) to all shareholders for every 10 shares based on the total share capital on the share registration date when the current profit distribution plan is implemented in the future.

The company has an annual processing capacity of 1 million tons of scrap aluminum and 1.4 million tons of aluminum sheet and foil. The company earlier laid out the renewable resources industry chain. It now has an annual waste aluminum treatment capacity of 1 million tons and a comprehensive utilization capacity of aluminum ash 0.12 million tons. It has become a leading domestic enterprise in terms of scale and process in the field of deformed aluminum upgrading applications. The company's aluminum sheet and foil business currently has a production capacity of 1.4 million tons. The company produces various products such as aluminum foil for soft pack batteries, electronic foil, pattern board, lightweight materials for commercial vehicles, food and drug packaging foil, etc., and the share of high-value-added products such as aluminum for new energy, new materials, aluminum for transportation, and aluminum for lightweight automobiles is gradually increasing.

Downstream automobile demand may maintain a high growth rate, and the company's competitive advantage is significant at the industry level. According to China Automobile Association data, domestic NEV consumption was +32.53% year-on-year from January to September '24, and the effects of the “trade-in” policy gradually became apparent. Combined with current domestic policy forces and rising expectations, we believe that downstream automobile consumption may continue to grow at a high rate. At the same time, EU carbon tariffs are currently being tested and are expected to be officially implemented in 2026. The company accounts for a high proportion of overseas customers, leading the recycled aluminum industry. It is expected that the advantages of the company's aluminum products may become more prominent in the future.

Profit forecasting and valuation

Although the third quarter results were affected by the decline in gross margin, after aluminum prices stabilized, we believe that the company's annual performance will maintain high growth. Maintaining a profit forecast, the company's 24-26 EPS is expected to be 1.47/1.77/2.06 yuan, respectively. Comparatively, the company's 25-year Wind unanimously expected an average PE value of 10.03 times, giving the company 10.03 times PE in 25, corresponding to a target price of 17.75 yuan (previous value of 16.17 yuan), maintaining the purchase rating.

Risk warning: Downstream demand falls short of expectations, and the company's production capacity under construction falls short of expectations.