Performance summary: The company released its 2023 semi-annual report. 2023H1 achieved operating income of 14.501 billion yuan, a year-on-year decrease of 19.04%; realized net profit of 1,313 billion yuan, a year-on-year decrease of 28.08%; realized net profit after deduction was 1,279 billion yuan, a year-on-year decrease of 28.90%.
The year-on-year decline in aluminum prices led to a decline in the company's performance. The main reason for the decline in the company's mid-report performance is that the profit of upstream products fell from a historical high level in the same period last year. The average price of raw aluminum in the first half of 2023 was 18,503 yuan/ton, down 13.60% from the same period last year; the average price of alumina powder was 2,897 yuan/ton, down 4% from the same period last year.
The prices of 2023H1 raw aluminum and alumina both fell compared to 2022H1, which led to a decline in the company's upstream product profits. At the same time, the structure of the company's downstream processing products continued to improve. In the first half of 2023, sales of the company's high-end products represented by automobile plates, aviation boards, and power battery foils accounted for about 14% of the company's total sales of aluminum products, an increase of about 1 percentage point over the same period last year; the gross profit of high-end products accounted for about 29% of the company's total gross profit of aluminum products, an increase of about 8 percentage points over the same period last year. In addition, the company's expenses continued to be optimized during the period. 2023H1's sales/management/finance/R&D expenses were 1.18/4.35/ -0.83/627 million yuan respectively, down 24.35%/0.45%/10.61%/25.24% from the same period last year. On a quarterly basis, the company's net profit for Q1 and Q2 was 519 million yuan and 794 million yuan respectively. The company's Q2 financial expenses decreased by 184 million yuan over the previous month, increasing the company's Q2 performance.
The company continues to develop high-end aluminum. 1) Automobile plate: As a leader in automobile aluminum plate manufacturing in China, the company has built close cooperative relationships with various car companies, relying on its current market advantage and high barrier product technical level, to further consolidate the company's position as a leading domestic automotive lightweight aluminum plate enterprise. Currently, the company has a production capacity of 200,000 tons of automobile panels and 200,000 tons of production capacity under construction. With the continuous growth and release of product production capacity, the number of customer base and market share will further increase. 2) Aviation Board: As the only company in China that also supplies OEMs such as Boeing, Airbus, and COMAC, the company supplies mature and stable products, and is highly competitive in terms of quality, price, and delivery. During the reporting period, as an upstream and downstream cooperative enterprise for domestic civil aircraft, the company continued to promote technology research and development and process improvement. It continued to make new breakthroughs in aviation plate R&D and trial production, qualification certification, and market development. At the same time, it helped the C919 project for large domestic aircraft and promoted the domestic substitution process for aviation boards. 3) Power battery foil: The company is committed to the high-end power battery foil product market, focusing on promoting high-end products centered on 10-12μm. Currently, it has well-known domestic battery enterprise customers such as Ningde Times, China Innovation Aviation, Guoxuan Hi-Tech, Everweft Lithium Energy, and Sunwoda.
The Indonesian alumina project progressed steadily, and production and sales were rapidly released. In October 2022, the company's 2 million ton alumina project in Indonesia was completed and put into operation. Indonesia's alumina production and sales are expected to increase dramatically in 2023.
The company's Indonesian base will also be further deployed to the entire industry chain. On April 25, 2023, the company announced that it will fund the construction of a 250,000 tons of electrolytic aluminum and 260,000 tons of carbon projects in Indonesia's Bintan Industrial Park. The electrolytic aluminum plant area is expected to be completed in July 2026, and the carbon plant area is expected to be completed in April 2026. As the company's Bintan Nanshan Industrial Park in Indonesia is put into operation one after another, the company's performance will grow further.
Firmly adhere to the green development path and steadily promote recycled aluminum projects. The company focuses on ESG development and vigorously lays out the recycled aluminum field. The recycling source is mainly process waste from tanks, tank covers, and automobile board manufacturers, plus aviation material milling materials.
After the project is completed, it is possible to achieve energy saving, emission reduction and clean production in the industrial chain, forming a complete closed loop of “alumina - high-end manufacturing of electrolytic aluminum - recycled aluminum”, leading to an upgrade in the company's production capacity structure. During the reporting period, some of the company's equipment has already entered trial production.
The transfer of electrolytic aluminum production capacity will further enhance the company's performance. On December 23, 2022, the company announced that it plans to transfer 336,000 tons of electrolytic aluminum production capacity to foreign countries. After this transfer, the company also has 480,000 tons of electrolytic aluminum production capacity.
The company's electrolytic aluminum production capacity index was transferred to Guizhou Huaren (100,000 tons), Guizhou Xingren (136,000 tons), and Shuangyuan Aluminum (100,000 tons), respectively. The total transaction price is 2,229 million yuan. It is expected that the transfer of the electrolytic aluminum index will be included in revenue one after another in the second half of 2023, which will further enhance the company's performance.
Profit forecast and investment suggestions: The gradual release of the company's high-end aluminum production capacity and Indonesian alumina production capacity will drive steady growth in the company's performance. In addition, the transfer of the company's 336,000 tons of electrolytic aluminum target will generate 2,229 million yuan in non-operating revenue, further enhancing the company's performance in 2023. We adjusted our profit forecast. We expect the company's net profit to be 52.09, 3,956, and 4.366 billion yuan respectively from 2023 to 2025, EPS to be 0.44, 0.34, and 0.37 yuan respectively, and PE corresponding to the closing price on August 25 to 6.9, 9.1, and 8.2 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: A sharp decline in downstream demand, large fluctuations in raw materials and energy costs, project commissioning falling short of expectations, etc.