On February 28, the company released its 23rd annual report, which achieved revenue of 28.844 billion yuan, -17.47% year over year; net profit to mother of 3.474 billion yuan, -1.18% year over year; net profit after deducting non-return to mother of 2,715 billion yuan, -29.03% year over year. 4Q23 achieved revenue of 7.154 billion yuan, -0.48% month-on-month; net profit to mother of 1,332 billion yuan, +60.70% month-on-month; net profit after deduction of 639 million yuan, or -19.77% month-on-month.

Alumina was fully produced, and weak overseas demand dragged down performance. (1) In '23, the company's 2 million ton alumina project in Indonesia reached full production. Annual alumina production and sales volume was 3,522,900 tons and 3,528,600 tons, respectively, up 19.73% and 18.69% year-on-year, respectively. 2H23 alumina powder's revenue was 3.271 billion yuan, +32.87% month-on-month, and its revenue share increased 5.83 percentage points month-on-month to 22.80%. (2) The company focuses on developing high value-added products. In '23, the company's share of high-end product sales increased by 1 percentage point to 14%, and the gross profit share of high-end products increased by nearly 9 percentage points to 30%. Compared with the share of 1H23 high-end products in gross profit, a further increase of 29%. (3) Overseas demand weakened and aluminum ingot prices declined in '23. The annual sales volume of hot-rolled coils/sheets was -13.89% to 893,400 tons, sales of cold-rolled coils/sheets -15.30% to 716,600 tons, aluminum foil sales -9.64% to 53,400 tons, and overseas revenue -26.74% to 13.575 billion yuan.

2H23 hot-rolled coil/plate revenue was -34.62% month-on-month to 262 million yuan, cold-rolled coil/plate revenue -8.20% month-on-month to 7.162 billion yuan, and aluminum foil revenue -20.55% month-on-month to 624 million yuan. The sharp drop in volume and price of deep-processing products led to a decline in revenue and performance.

The transfer income of the electrolytic aluminum index increased significantly to the net profit attributable to the mother. Q4's revenue was +0.48% month-on-month to 7.154 billion yuan, operating costs were +3.15% month-on-month to 5.729 billion yuan, or bauxite costs rose due to the Q4 fuel tank explosion in Guinea. Gross profit was -13.89% month-on-month to 1,425 billion yuan, and gross margin decreased 3.21 percentage points month-on-month to 19.92%. In '23, the company transferred 336,000 tons of electrolytic aluminum production capacity. Q4 received the transfer of the electrolytic aluminum index and disposed of related assets. The revenue obtained was 755 million yuan, driving Q4's net profit to mother to increase sharply by 60.70% month-on-month, and ROE increased 1.31 percentage points to 2.79% month-on-month.

Strengthen the implementation of shareholder returns and demonstrate confidence in development. The company plans to distribute a cash dividend of 1.20 yuan (tax included) for every 10 shares to all shareholders in '23. A total cash dividend of 1,405 billion yuan is proposed. The cash dividend ratio is 40.44%, an increase of 27.12 percentage points over the previous year. Based on the company's latest closing price of 3.02 yuan/share, the dividend rate is 3.97%. In addition, the company launched a 24-year dividend plan. On the premise that the dividend ratio does not exceed 30% of the net profit that can be distributed to the mother in the current period, the company formulates a 24-year profit distribution plan and implements it within the specified period. An active investor return strategy shows the company's confidence and determination for its own long-term development.

The company's revenue for 24-26 is estimated to be 319.345/38.3 billion yuan, net profit attributable to mother will be 38.19/41.39/4.639 billion yuan, and EPS will be 0.33/0.35/0.40 yuan, respectively, corresponding PE 9.26/8.54/7.62 times, respectively. Maintain a “buy” rating.

Risk warning

Product prices have dropped sharply; production capacity for alumina and automotive panels has fallen short of expectations; production costs have risen sharply; and there is a risk of RMB exchange rate fluctuations.