A core enterprise of strategic aluminum and electronic new materials in China. After more than 60 years of development, the company has one of the world's largest high-purity aluminum production bases. Its main business is designing new aluminum-electronic materials, high-performance aluminum alloys, and sputtering targets; its main business revenue and gross margin have maintained a steady upward trend. Currently, the company has a complete electrode foil industry chain, with production capacity of 180,000 tons of electrolytic aluminum, 50,000 tons of high-purity aluminum, 35,000 tons of aluminum foil, and 23 million square meters of electrode foil.
The company focuses on the high-value-added aluminum electronic materials business. The boom in electrolytic aluminum and strong demand for electrode foils have increased the company's profits
The company has significant technical advantages domestically and globally. It has a complete circular economy industry chain of “energy - high purity aluminum/aluminum alloy - electronic aluminum foil - electrode foil” high-end electronic new materials. The economic added value of all links is high. The added value of electrode foil compared to a single ton of electronic aluminum foil is 160,000, and the added value of a single ton of electrolytic aluminum is 180,000.
The company's 180,000 tons of electrolytic aluminum production capacity supports downstream deep processing operations to achieve self-sufficiency in electrolytic aluminum raw materials. Under conditions where alumina prices are stable, the overall cost is stable, and the rise in aluminum prices enhances the company's performance. Every 1,000 yuan/ton increase in aluminum prices at full production has brought the company a profit growth of more than 100 million yuan. In the context of the carbon-neutral era, the supply of electrolytic aluminum is at its peak, and demand continues to grow. In the future, profits will remain relatively high, supporting the company's overall performance.
The downstream applications of capacitor components for electrode foil products are mainly in the fields of home appliances and new energy. Demand is affected by macroeconomic and new energy development trends. The recovery of the global economy and the continuous development of the new energy industry are driving demand for electrode foil and electronic aluminum foil. Domestic demand for electrode foil is expected to exceed 270 million square meters in 2025, with a CAGR of about 3%.
High-performance aluminum alloy and high-purity aluminum sputtering target projects are expected to become a new growth point for the company's performance
The company has mastered the production technology for ultra-high purity aluminum target blanks. The product has been verified by customers such as Yanjin New Materials, Jiang Feng Electronics, and Heraeus Group. Given the price barriers brought about by imported chips for a long time, the domestic localization policy incentives, the semiconductor industry has begun the localization process of aluminum targets, and the prospects for aluminum target import substitution are broad; the prosperity of superimposed panel displays, photovoltaics, semiconductors and other industries is expected to continue to rise, and demand for aluminum targets is expected to exceed 450 billion yuan in 2025, CAG15%..
Because of its strength and toughness, high-performance aluminum alloys are commonly used in high-precision fields such as aerospace. Currently, the annual demand for high-strength, high-tensile aluminum alloy ingots in China is about 100,000 tons. It is expected to exceed 200,000 tons by 2025, with a CAGR of 20%.
The company plans to invest in a three-layer high-purity aluminum project with an annual output of 15,000 tons, an annual output of 3,000 tons of high-strength high-tenacity aluminum alloys, and an expansion project of the existing pilot line with an annual output of 500 tons of ultra-high purity aluminum-based sputtering target plates. The company continues to increase its efforts to develop the downstream market for high-purity aluminum, further expand the company's market share and enhance its competitiveness; it is expected that fund-raising projects will continue to be completed and put into operation next year, which is expected to increase the company's net profit by 114 million yuan a year after delivery.
Investment suggestions: The company has been deeply involved in the high-purity aluminum-based new materials industry chain for many years. The industrial chain, technology and other advantages continue to consolidate future growth, giving it an “increase in holdings” rating. We expect all fund-raising projects to be put into operation one after another in the second half of next year. Our main business will benefit from rising aluminum prices and the continuous release of high-end aluminum materials. We expect the company to achieve operating income of 63.29/6992/7497 billion yuan in 2021/2022/2023, with net profit of 6.06/6.93/872 million respectively. The corresponding EPS is 0.59/0.68/0.85. Currently, the corresponding stock price PE valuation is 16/14/11 times, giving a “increase in holdings” rating.
Risk warning: Risk of fluctuations in raw materials and energy prices, environmental policy risk, risk of core technology loss and loss of technical talent, risk of downstream demand falling short of expectations, risk of fund-raising projects falling short of expectations, risk that public information used in research reports may be delayed or not updated in a timely manner, etc.