The company's net profit to mother fell 12% year-on-year in 2024Q1-Q3. 2024Q1-Q3 achieved revenue of 5.49 billion yuan (YoY +12.2%), net profit of 0.35 billion yuan (YoY -11.8%), and net profit not attributable to mother of 0.34 billion yuan (-5.6% YoY). 2024Q3's operating income was 1.91 billion yuan (YoY +2.1%, month-on-month +1.8%), net profit to mother 0.104 billion yuan (YoY -37.9%, -15.8% month-on-month), net profit of 0.1 billion yuan (YoY -29.6%, YoY -17.5%).

In the face of internal and external pressure, production and sales increased steadily. In the first three quarters of this year, the company sold 0.1901 million tons of aluminum extrusions and parts, an increase of 4.17% over the previous year. The main factors that reduce profit are: ① There has been downward pressure on automotive aluminum extrusions since this year, and processing costs have changed; ② Yatong Technology's production accident affected the company's production and sales. Although the company resumed production in the first half of the year, the cast rod production line affected by the accident did not resume, and the company's outsourcing of aluminum bars increased costs; ③ accruing interest expenses on convertible bonds issued by the company led to an increase in financial expenses.

Looking ahead to the future market, the company's low-carbon aluminum bar project in Minhe, Qinghai is progressing smoothly. It will be completed and put into operation by the end of 2024 according to the schedule. The company's raw material costs will drop, and the product will be reduced in carbon.

In addition, in the stock incentive plan implemented by the company in the 3rd quarter of last year, the first sales restriction period expired. Based on net profit deducted from non-return mother of 0.415 billion yuan in 2022, the company withheld net profit of 0.539 billion yuan in 2023, a growth rate of more than 20%, and the sales restrictions were lifted in accordance with the sales restriction conditions. The condition for lifting the sales restriction during the second sales restriction period is that net profit after deducting non-return to mother in 2024 increased by 40% compared to 2022, which is estimated to be approximately 0.58 billion yuan.

Risk warning: Market competition increases the risk, the risk of large fluctuations in aluminum prices, and the risk that the progress of new construction projects falls short of expectations.

Investment advice: Maintain an “better than the market” rating.

Assuming the average annual spot price of aluminum ingots in 2024/2025/2026 is 19,500 yuan/ton, the company's estimated operating income in 2024-2026 is 7.85/9.11/10.56 billion yuan, and net profit to mother is 0.471/0.587/0.77 billion yuan (previous value 0.566/0.728/0.898 billion yuan), year-on-year growth rate of -16.7/24.5/31.3%, and diluted EPS is 0.38/0.47/0.62 yuan respectively. The current stock price corresponds to PE 14.8/11.9/9.1X. As a leading supplier of automotive aluminum extrusions, Asia Pacific Technology, with its technical and customer advantages, will significantly benefit from the increased penetration rate of lightweight automobiles and new energy vehicles. With the volume of chassis body parts and the deep processing of aluminum extruded parts for new energy vehicles, the company has more room to grow and maintain a “superior to the market” rating.