The company announced its 2024 quarterly report. 2024Q1 achieved revenue of 7.22 billion yuan, +5.7% year over month, +1.0% month on month; realized net profit of 850 million yuan, +64.0% year on year, and -36.1% month on month; net profit without return to mother of 830 million yuan, +62.9% year on month, +30.0% month on month. The sharp rise in Indonesia's alumina business boosted Q1 results beyond expectations.
The volume and price of alumina in Indonesia has risen sharply. Volume: Indonesia's alumina production capacity of 2 million tons will gradually reach full production in 2023. We expect Indonesia to produce 500,000 tons of alumina in Q1, full domestic production capacity of electrolytic aluminum, and normal downstream aluminum processing production. Price: 24Q1 domestic aluminum price +82 yuan/ton, alumina +183 yuan/ton, pre-baked anode -232 yuan/ton, thermal coal price -56 yuan/ton month-on-month. We estimate that the Q1 pre-tax profit of electrolytic aluminum in Shandong is 1,735 yuan/ton (excluding upstream alumina profit). The company's net profit per ton of alumina in Indonesia in 2023 was 668 yuan/ton, and overseas alumina prices rose in 24Q1. It is estimated that the company's net profit per ton of alumina in Indonesia is over 800 yuan/ton.
24Q1 performance split: Electrolytic aluminum and alumina businesses in Indonesia increased main business profits. In 24Q1, the main profit increases were gross profit (+296 million yuan); expenses and taxes (+94 million yuan, mainly a reduction of 74 million yuan in financial expenses); other/investment income (+57 billion yuan); impairment losses, etc. (+32 billion yuan).
Major profit deductions: minority shareholders' equity (-141 million yuan); income tax (-011 million yuan). Looking at 24Q1 month-on-month, the main profit increases were: gross profit (+180 million yuan); expenses and taxes (+45 million yuan); minority shareholders' equity (+0.73 billion yuan); and income tax (+125 million yuan). Major profit reduction items: asset disposal income (-756 million yuan; 23Q4 confirmed the target income of 136,000 tons of electrolytic aluminum transferred); other income (-206 million yuan).
Future highlights. 1) Indonesia lays out 250,000 tons of electrolytic aluminum, adds 2 million tons of alumina, and opens up room for upstream growth. The company plans to invest 6.06 billion yuan to build 250,000 tons of electrolytic aluminum and 260,000 tons of carbon in Indonesia. In addition, the company announced in April 2024 that it will invest 6.33 billion yuan in Indonesia to build 2 million tons of alumina production capacity in two phases, and looks forward to future business growth in Indonesia. 2) Promote the spin-off of the Indonesian business and listing on the main board of the Hong Kong Stock Exchange.
Through the spin-off and listing, it will use Hong Kong capital market financing to enter the international capital market, which will help the company further deepen its business in Indonesia and surrounding markets and continue to explore the advantages of Indonesian bauxite resources. 3) The NEV market is growing rapidly, and there is plenty of room for automotive board demand. The energy consumption requirements for automobiles are becoming more and more stringent, the demand for automobile boards is high, and the competitive pattern of the industry is good. The company is a leading automobile board. Currently, it has a production capacity of 200,000 tons, and is actively promoting the construction of 200,000 tons of production capacity in Phase III, which will fully benefit the future. 4) The product structure continues to be optimized. Demand for aviation boards is picking up, and mass production of C919 aircraft in the future will open up space for domestic aviation board demand. The company's aviation board is growing rapidly. In the future, as the scale of automobile boards and aviation boards expands, the company's product structure will continue to be optimized.
Investment suggestions: The company continues to release alumina in Indonesia, with strong upstream raw material support capacity, and the company's performance will gradually improve. We expect the company to achieve net profit of 3.864 billion yuan, 4.104 billion yuan, and 4.323 billion yuan in 2024-2026. The PE corresponding to the current price is 10x, 10x, and 9x, maintaining the “recommended” rating.
Risk warning: Demand for automobile panels fell short of expectations, alumina prices fell, and coal prices rose sharply.