Key points of investment
The performance was impressive. 2023Q1-Q3 achieved operating income of 13.643 billion yuan, a year-on-year decrease of 2.06%, and net profit of 794 million yuan, a year-on-year decrease of 31.20%. 2023Q3 achieved operating income of 4.958 billion yuan, up 14.97% year on year, up 6.83% month on month; net profit was 380 million yuan, up 123.13% year on year, up 76.94% month on month; net profit after deducting non-return was 355 million yuan, up 100.49% year on year, up 66.15% month on month.
With the acquisition of 25% of Zhongfu Aluminum's shares, electrolytic aluminum equity production capacity continues to increase. In August 2022, the company's subsidiaries, Guangyuan Linfeng Aluminum Electric and Guangyuan High Precision Aluminum, were affected by extreme weather, and power supply was tight, causing some production capacity to stop. In the first half of 2023, according to the electricity supply situation, the company promoted the resumption of remaining production capacity in an orderly manner. Currently, Guangyuan Linfeng Aluminum and Guangyuan High Precision Aluminum has a total production capacity of 500,000 tons/year of “green hydropower aluminum” and “green hydropower aluminum” operating normally. In September 2023, the company announced that it plans to acquire 25% of Zhongfu Aluminum's shares held by Yulian Group. After the acquisition is completed, the listed company will hold 76% of Zhongfu Aluminum's shares. After completion, the company's equity production capacity of electrolytic aluminum is expected to continue to increase.
Aluminum processing increased 120,000 tons to 690,000 tons, and 500,000 tons of recycled aluminum were relegated for use. The company has implemented project construction according to the plan. The 120,000 tons of high-precision aluminum sheet and strip project has been completed and put into operation, the 120,000 tons of new green packaging material project, 150,000 tons of high-precision aluminum alloy sheet ingot project, and the 30,000 tons of aluminum and aluminum alloy strip coating production line project (the first phase of the aluminum and aluminum alloy strip coating production line project with an annual output of 60,000 tons) have entered the commissioning stage, and the UBC alloy liquid project with an annual output of 150,000 tons is being installed. In the field of recycled aluminum, the company is investing in the construction of an aluminum recycling project with an annual output of 500,000 tons. After the completion of the project, the company will achieve relegated use of recycled aluminum through collaborative development with downstream aluminum deep processing business.
The gradual resumption of coal production is expected to reach another level in 2024. Jinling Coal, a second-level subsidiary of the company Yulian Coal Industry Holdings, resumed production in February 2023, with a production capacity of 1.2 million tons/year; the Xinfeng Coal Mine under Guangxian Industry and Trade has a production capacity of 600,000 tons/year, and Huixiang Coal has a production capacity of 450,000 tons/year. It is expected that production will gradually resume from next year to year, with growth expected.
Yunnan has once again limited the production of electrolytic aluminum, and the supply side is making waves again. According to SMM, production of electrolytic aluminum in Yunnan has been cut again. The four electrolytic aluminum companies in the province have cut production by varying degrees. The total production reduction is expected to be 1.15 million tons. Although domestic downstream demand for electrolytic aluminum is currently average and the number of orders is limited, supply-side restrictions are expected to support aluminum prices to remain high.
Profit forecasting
The company's net profit from 2023-2025 is estimated to be 11.9/18.5/2.18 billion yuan, corresponding to EPS of 0.30/0.46/0.54 yuan, and corresponding PE of 11.42/7.37/6.25 times.
Risk warning:
Electrolytic aluminum fluctuated greatly, production was limited by environmental protection and other policies, and coal prices fluctuated greatly. Domestic and foreign demand fell short of expectations.