On April 26, 2022, the company released its 2021 annual report. In 2021, the company achieved revenue of 8.283 billion yuan, an increase of 47.2% over the same period last year, a net profit of 852 million yuan, an increase of 84.4%, and a non-return net profit of 850 million yuan, an increase of 92.3% over the same period last year. 2021Q4, the company achieved revenue of 2.28 billion yuan, an increase of 44.1% over the same period last year, an increase of 11.1% over the same period last year, a net profit of 199 million yuan, an increase of 6% over the same period last year, a decrease of 12.1% over the previous month, and a deduction of 199 million yuan for non-return net profit, an increase of 20.8% over the same period last year and a decrease of 10.5%. The performance is in line with the forecast.

The year-on-year increase in net profit in 2021 is mainly due to the expansion of the price gap of fine waste aluminum and the substantial increase in scrap trade sales during the reporting period. Price difference of fine waste aluminum: in 2021, the price difference of fine waste aluminum reached 4070.2 yuan / ton, an increase of 13.89% over the same period last year. Sales volume: among the company's main products in 2021, scrap trade sales increased significantly by 48.46% to 702000 tons compared with the same period last year, while sales of aluminum alloy ingots and scraps decreased by 10.76% and 1.18%, respectively, to 290,100 tons. The increase in scrap trade sales was mainly due to the company's acquisition of the Gillard plant in Ohio at the end of 2020. The decrease in sales of aluminum alloy ingots is mainly due to the impact of the outbreak in Malaysia in July-August 2021, which is now stable and the impact has been eliminated. Cost: the sales cost of the company's aluminum ingots in 2021 is 12700 yuan / ton (excluding tax), while the annual average price of broken aluminum in Nantong excluding tax is 13,400 yuan / ton. The company's sales cost is only 94.8% of Nantong broken aluminum, with obvious cost advantages. This is mainly because the company has the advantage of global procurement and is able to purchase raw materials with lower costs overseas.

2021Q4, the company's parent net profit decreased by 27.44 million yuan compared with the previous month. From a split point of view, the decrease in homing net profit is mainly due to the increase in impairment loss (43.15 million yuan) and income tax (18.84 million yuan). The impairment loss may mainly come from the inventory decline caused by the fall in Q4 aluminum price, and there is an impairment reversal in Q3, so there is a big change in Q3. The profit-increasing points are mainly an increase of 52.76 million yuan in gross profit, or a low base because the production and sales of Q3 aluminum ingots are affected by the epidemic in Malaysia.

Core focus: low cost + high growth, recycled aluminum veteran coruscate new vitality. ① low cost: the core advantage of the company lies in the waste aluminum recycling system at home and abroad and the comprehensive cost advantage brought by the aluminum alloy production base in Malaysia. According to SMM data, as of April 26, 2022, the average price difference between the United States and domestic aluminum scrap reached 5074 yuan / ton in 2022. Considering that the company has the advantage of digital procurement through Metalico, the actual price of American aluminum scrap may be lower. ② high growth: Malaysia 1.3 million tons production expansion project has begun, the first phase of 650000 tons is expected to be put into production in the second half of 2023. After reaching production, the company's total capacity in Malaysia will reach 1.5698 million tons, an increase of 482% compared with the original production capacity of 269800 tons.

Profit forecast and investment suggestion: the global layout of the company's scrap aluminum acquisition end, with the advantage of purchasing raw materials at a low price, with the improvement of waste aluminum recycling capacity, the company's capacity utilization of aluminum ingot production has greater room for improvement. Malaysia 1.3 million ton project will open up long-term growth space. It is assumed that 650000 tons of the first phase of the project will be put into production in the second half of 23, contributing 300000 tons in that year. We raise our profit forecast for the company and expect the company to achieve a net profit of 1.094 billion yuan, 1.538 billion yuan and 2.385 billion yuan from 2022 to 2024, with a PE of 7x, 5x and 3x corresponding to the closing price on April 26, maintaining the "recommended" rating.

Risk tips: the progress of the project is not as expected, the price difference of fine waste aluminum has dropped, and the import and export policy of waste aluminum has changed.