Key points of investment:

The company actively improves quality and efficiency, and continues to improve profitability

The company is a leader in the domestic aluminum industry. Its business layout includes bauxite, alumina and raw aluminum, and is equipped with an energy business. The company continued to improve quality and efficiency while reducing its low gross profit trade business. In the first three quarters of 2024, the company's net profit was 9.017 billion yuan, up 68.46% year on year, a record high for the same period since 2020; gross margin/net margin were 15.23%/8.65%, respectively, up 3.90 pct./3.76 pct.

The supply of raw aluminum is limited and demand is improving, and enterprises with a large resource layout are expected to benefit from the current increasingly tight domestic bauxite resources, increasing dependence on imported ore, and bauxite pricing rights are gradually shifting away. Bauxite prices may remain strong in the short term, which supports aluminum prices; domestic raw aluminum production capacity has compliance limits, and additional production capacity is limited in the future; overseas interest rate cuts, domestic promotion of stable real estate decline, and development in emerging fields are expected to drive the downstream demand for aluminum to improve. We believe that companies in the aluminum industry that have a large resource-side layout are expected to benefit from the improvement of the industry's supply and demand pattern.

The company's resources are highly guaranteed, and there is still room for growth in production capacity

The company has rich bauxite resources. Not only does it have the highest domestic bauxite resources, but it also actively obtains overseas bauxite resources in Africa, Southeast Asia and other places, with a high degree of resource guarantee. The company has a large production scale advantage. By the end of June 2024, the company's production capacity of alumina, primary aluminum, fine alumina, high-purity aluminum and aluminum anodes ranked first in the world. At the same time, the company is actively promoting the progress of new production capacity projects for alumina and raw aluminum, and there is still room for future growth in production capacity.

Profit Forecasts and Ratings

Under a neutral scenario, we expect the company's 2024-2026 net profit to be 11.312/12.583/14.124 billion yuan, EPS 0.66/0.73/0.82 yuan/share, respectively, and the corresponding PE is 11.83X/10.64X/9.47X, respectively. The company is a leader in the domestic aluminum industry, and for the first time, it was given an “increase in wealth” rating.

Risk warning

Resource acquisition and supply risks, safety and environmental risks, international business risks, market changes and market competition risks, and risks of projects falling short of expectations.