Incident: The company disclosed its 2021 mid-year report. During the reporting period, the company achieved revenue of 3,993 million yuan, an increase of 70.10%, and net profit attributable to the parent company of 322 million yuan, an increase of 140.10%, including net profit of 294 million yuan after deducting non-return to the mother, an increase of 179.36%. Looking at the second quarter alone, the company achieved net profit of 161 million yuan after deducting 20.15% from the previous month, an increase of 148.42%, and the company's performance grew rapidly.

As industry sentiment continues to rise and production and sales of major products soar, the company's revenue and performance have grown rapidly. Exports and new energy demand boosted industry sentiment, and rising prices of electrolytic aluminum boosted the company's profit level. During the reporting period, the global economy continued to recover, domestic epidemic control was strong, and the industrial chain recovered rapidly. Export demand for the company's main products was strong. Coupled with the rapid development of the domestic new energy sector, it boosted the sentiment of passive components such as aluminum electrolytic capacitors and high-performance aluminum alloy materials, which in turn spread to upstream electrolytic capacitor materials such as upstream electrode foils and high-performance aluminum alloy materials. In addition, the price of the company's supporting electrolytic aluminum alloy materials was reported. The average price of detoxification was 17,457 yuan/ton, up year on year At 3,955 yuan/ton, the company's electrolytic aluminum cost is relatively stable, and the rise in aluminum prices has raised the company's overall profit level. Production and sales of the company's main products expanded. According to strong demand in the downstream market and relatively insufficient production capacity, the company increased the production capacity of existing major products through technological transformation and process improvement. During the reporting period, the company achieved sales of electrode foil, electronic aluminum foil and alloy products of 13.1695 million square meters, 0.98 million tons, and 37,400 tons respectively, up 113.14%, 18.44%, and 55.94%, respectively. The corresponding gross profit per unit was 11.7 yuan/square meter, 9259 yuan/ton, 2,079 yuan/ton, respectively, compared with last year. Yuan/square meter, -2,818 yuan/ton, +1139.35 yuan/ton. The gross profit per unit of some products declined due to rising raw material prices and climbing new production lines.

Continued technological innovation strengthens development momentum, and the level of refined full-cost management and control has improved. During the reporting period, the company increased investment in scientific and technological research and development, independently developed 40 scientific and technological projects, completed the development and life testing of ultra-high voltage anode foil products for 5G capacitors, high-strength, high-tenacity aluminum alloy products for aerospace, ultra-high purity aluminum sputtering targets for flat panel displays and semiconductor chips, aluminum-based bonding wire busbars, etc. continuously strengthened the company's development momentum; the company's full-cost management and control task force continued to promote quantitative evaluation of improvement indicators, forming a detailed cycle using key indicators such as power structure, per capita output value, energy consumption rate per unit of output value, production rate, and comprehensive equipment efficiency Evaluation system, strengthening Overall cost control level. During the reporting period, the company's gross profit margin was 11.73%, down 1.57 pcts year on year, net interest rate was 8.12%, up 2.35 pcts year on year.

The allotment of shares was successfully implemented to help the construction of the fund-raising project: during the reporting period, the company successfully completed the 2020 senior stock financing work, and raised capital in April 2021 to provide financial support for the construction of the company's major projects. The company's fund-raising projects involved the “three-layer high-purity high-purity aluminum purification and supporting processing project with an annual output of 15,000 tons” and the “ultra-high purity aluminum-based sputtering target plate project with an annual output of 500 tons”. The overall profitability of the product is strong. According to the company's estimates, the overall profitability of the product is strong. According to the company's estimates, the company will bring the company an annual net profit of more than 100 million yuan after it is fully put into operation; at the same time, it will bring the company a net profit of more than 100 million yuan per year; at the same time, it will bring the company an annual net profit of more than 100 million yuan after raising capital and repayment of the loan. Decrease Company financial expenses.

Industry sentiment is expected to continue to rise. Aluminum electrolytic capacitors use aluminum foil materials as the basic electronic component material. In the first half of 2021, with strong demand for consumer electronic goods, and the rapid rise in the emerging fields of new energy electric vehicles and new energy power generation, demand in the passive component industry such as aluminum electrolytic capacitors is strong, and the rise in aluminum prices on the cost side is expected to smoothly pass downstream. Furthermore, in the context of the carbon neutrality era, electrolytic aluminum supply is at its peak, and the price center on the demand side will remain high, and the future price center will remain high, forming good support for the company's performance center.

Profit forecast and investment advice: Based on the continued upward trend of industry sentiment, high aluminum prices, and the expansion of production and sales of the company's main products brought about by the commissioning of construction projects, we raised the 2021-2023 aluminum price assumptions to 1.8, 1.8, and 18,000 yuan/ton, and raised the company's net profit to 729/951/1,167 million yuan from 2021 to 2023 (previous value of 606/6.93/872 million yuan respectively). The current stock price corresponds to PE 18/13/11 times, respectively, maintaining the company's “buy” rating.

Risk warning: macroeconomic fluctuations; large fluctuations in product prices; risk that the company's profit level falls short of expectations due to a sharp rise in the cost of raw materials, etc.; risk of downturn in the prosperity of the electrode foil industry; risks of projects under construction falling short of expectations.