Core views
The company's net profit for the first quarter was 851 million yuan, a year-on-year increase of 63.99%. The company focuses on developing high value-added products such as automobile boards, aviation panels, and power battery foils. With the 200,000 tons/year production line under construction, the production capacity of automobile boards will reach 400,000 tons/year, and aviation board production will steadily increase with the recovery of the aviation industry and C919 volume, and the proportion of the company's high-end products will gradually increase. The 2 million tons/year alumina project invested by the company in Indonesia has already reached production, with low cost and strong profitability. The company recently announced that it plans to expand the alumina project by 2 million tons/year in two phases. The construction period is 2.5 million tons/year. After completion, the company's profitability will increase markedly.
occurrences
Net profit for the first quarter was 851 million yuan, up 63.99% year on year. Nanshan Aluminum released its 2024 quarterly report showing that the company's main revenue for the first quarter was 7.224 billion yuan, up 5.7% year on year; net profit to mother was 851 million yuan, up 63.99% year on year; after deducting non-net profit of 831 million yuan, up 62.91% year on year; debt ratio 22.16%, investment income of 21.975 million yuan, overall gross profit margin 22.23%.
Brief review
The volume and price of alumina have risen sharply
At the beginning of 2024, the price of alumina rose markedly. The average price of alumina in the first quarter was about 3,224 yuan/ton, up about 10.54% from the same period last year; the average price in the overseas alumina market in the first quarter was around 368 US dollars/ton, up about 2.14% from the same period last year. The average price of electrolytic aluminum in the first quarter of 2024 was around 19056 yuan/ton, up about 3.11% from the same period last year. The company's 2 million ton alumina project in Indonesia has reached full production and was at full production level in the first quarter of 2024.
The proportion of high-end products is steadily increasing
The company focuses on developing high value-added products such as automobile panels, aviation panels, and power battery foils. In 2023, the company's high-end products accounted for 30% of gross profit, an increase of nearly 9 percentage points over 2022. The company's automobile board is the first domestic manufacturer to achieve mass production of aluminum plates for four doors and two covers of automobiles. It currently has a production capacity of 200,000 tons/year of automobile panels, and the construction of 200,000 tons/year is expected to be put into operation in 2024. The automobile board production capacity will reach 400,000 tons/year, and it will become the main supplier in the domestic automobile board market. The company's aviation board is the only company in China that also supplies OEMs such as Boeing, Airbus, and COMAC. It has solved the “skeleton” and “coat” problems of domestic aircraft for domestic C919 aircraft, and promoted the domestic replacement process of aviation boards. Currently, the aviation class production capacity has been built at 50,000 tons/year. With the recovery of the aviation industry and the volume of domestic C919 aircraft, the company's aviation board production is expected to increase steadily.
Indonesia has strong profitability and plans to build another 2 million tons of production capacity
The company has completed and put into operation a 2 million ton alumina project in Indonesia. The local park is rich in bauxite resources and convenient shipping. The local park has a 20-year preferential tax policy, which has an outstanding low cost advantage and effectively enhances the company's overall profitability and international competitiveness. In 2023, the Indonesian alumina project subsidiary had revenue of 4.78 billion yuan, net profit of 1.26 billion yuan, and a net interest rate of 26.4%. The company's latest announcement stated that it will invest about 6.332 billion yuan to continue the project plan to expand 2 million tons/year alumina production capacity in Indonesia. The construction period of the two phases is 1 million tons/year each. After the project is completed and put into operation, the company's revenue scale and profitability will be significantly increased.
Investment proposal: With the completion and commissioning of the company's new 200,000 tons/year automobile board production capacity, the company will become the most important domestic automotive board supplier, and the proportion of the company's high-value-added products will increase steadily. The Indonesian alumina project is highly profitable, and the proposed construction of 2 million tons/year production capacity will further enhance the company's profitability. The company's net profit from 2024 to 2026 is estimated to be 38.8/4134.57 billion yuan, respectively, and PE corresponding to the current stock price is 11/10/9 times, respectively. Considering the company's position in the aluminum processing industry and its low cost advantage, the company is given a “buy” rating.
Risk warning: 1. The company's performance growth depends on the steady expansion of new automobile board production capacity, and the completion and commissioning of the Indonesian alumina project and the electrolytic aluminum project. If the construction progress of the project falls short of expectations, the company's performance will be affected; 2. The company's aluminum processing material pricing model is “aluminum price+processing fee”. After the company sells 336,000 tons of electrolytic aluminum production capacity, the raw aluminum supply gap will be covered by market-based procurement and recycled aluminum, and the price fluctuates or affect the company's profitability; 3. China's aluminum processing industry has developed rapidly over the years, and domestic companies entering the industry have continued to increase, although the number of domestic companies entering the industry has continued to increase. Processing material positioning High-end, but if competition in the industry intensifies, the company's profitability will also be affected.