Key points of investment

Event: The company released its report for the third quarter of 2024. In the first three quarters of 2024, the company achieved operating income of 23.66 billion yuan, +21.59% year over year; achieved net profit of 1.41 billion yuan, +21.58% year over year; achieved net profit deducted from non-mother of 1.16 billion yuan, +24.85% year over year. The sharp year-on-year increase in revenue and net profit was mainly due to a steady increase in production and sales scale. In the first three quarters of 2024, sales of aluminum sheet and foil were 1.087 million tons, up 17.4% year on year. 2024Q3 achieved revenue of 8.34 billion yuan in a single quarter, +22.4% YoY, +2.6% month-on-month; realized net profit to mother of 0.34 billion yuan, -4.6% YoY and -51.8% month-on-month. In addition, the company plans to distribute a cash dividend of 0.5 yuan for every 10 shares of all shares, for a total cash dividend of RMB 0.062 billion.

The company released a business report for September 2024, and the cumulative production and sales of aluminum sheet and foil maintained a high year-on-year growth rate. In terms of production.

① Single month: The company produced 0.1248 million tons of aluminum sheet and foil in September 2024, an increase of 17.8% over the previous year; it produced 0.0012 million tons of aluminum profiles, a decrease of 20.0% year on year. ② Cumulative: From January to September 2024, the company produced 1.0873 million tons of aluminum sheet and foil, an increase of 17.4% over the previous year; it produced 0.0131 million tons of aluminum profiles, a decrease of 0.8% over the previous year.

In terms of sales. ① Single month: The company sold 0.1263 million tons of aluminum sheet and foil in September 2024, an increase of 29.1% over the previous year; sold 0.0011 million tons of aluminum profiles, which was the same as the previous year. ② Cumulative: From January to September 2024, the company sold 1.0866 million tons of aluminum sheet and foil, an increase of 18.7% over the previous year; it sold 0.0112 million tons of aluminum profiles, an increase of 7.7% over the previous year.

24H1 aluminum prices fluctuated higher, and 24Q3 aluminum bottomed out and rebounded. The company benefited from the narrowing of domestic and foreign aluminum price differences compared to the beginning of the year.

According to data from Changjiang Nonferrous Metals Network, the average price of 2024Q3 spot aluminum reached 19,561 yuan/ton, down 4.7% from 2024Q2, while the average price of spot aluminum in 2024Q2 was 20,533 yuan/ton, up 7.8% from 2024Q1.

The 2024H1 overseas situation is grim, driving up external aluminum prices. Combined with the country's continuous macroeconomic policies to boost consumption, spot aluminum prices continued to rise; Q3 aluminum prices fell first and then rose due to expectations of interest rate cuts, energy prices, etc. Since this year, the situation where the price of aluminum is lower than the domestic aluminum price has gradually reversed. The company's foreign trade sales price has adopted the model of aluminum price+processing fee. If the price of aluminum continues to be higher than the domestic aluminum price, it will increase the company's foreign trade sales profit. According to our estimates, the price difference between 2024Q1-Q3 domestic and foreign aluminum is 922 yuan/ton, -51 yuan/ton, and 111 yuan/ton, respectively.

The long-term planned production and sales scale reached 2 million tons, and the application of recycled aluminum upgrade continues to increase. The company has 9 wholly-owned subsidiaries, 2 holding subsidiaries, 2 wholly-owned subsidiary companies, and 3 shareholding companies. It currently has production bases in Gongyi, Zhengzhou, Xingyang, Dongguan, Kunshan, and Gwangyang, South Korea. Sales volume of aluminum sheet and foil rapidly expanded from 0.31 million tons in 2012 to 1.25 million tons in 2023, and the company's recycled aluminum upgrade application capacity has reached 1 million tons. With the gradual commissioning of 0.7 million tons of new green aluminum alloy material production capacity in the Jianyirui New Materials Project, the company's production and sales scale can reach 2 million tons, and the production capacity for recycled aluminum upgraded applications will reach 1.4 million tons.

Profit forecast. Production and sales achieved significant growth in the first three quarters of 2024, and the situation where the price of aluminum was lower than domestic aluminum prices gradually mitigated and increased foreign trade sales profits. We expect revenue for 2024-2026 to be 33.6/37.9/40 billion yuan respectively, net profit to mother of 1.93/2.19/2.31 billion yuan, corresponding EPS of 1.55/1.76/1.86 yuan, and PE corresponding to the closing price on October 29, 2024 was 8.5x/7.5x/7.1x, respectively, maintaining the “buy” rating .

Risk warning: The progress of projects under construction falls short of expectations; downstream demand falls short of expectations; aluminum processing costs have dropped sharply.