Shenhuo Co., Ltd. released its three-quarter report for 2024

The company achieved revenue of 28.314 billion yuan in the first three quarters of 2024, -1.1% year-on-year; realized net profit to mother of 3.538 billion yuan, or -13.75% year-on-year. Single Q3 revenue was 10.093 billion yuan, +6.02% YoY, +0.95% month-on-month; net profit to mother was 1.254 billion yuan, -8% YoY, +5.03%.

The coal sector gradually recovered in the second half of the year, and performance improved month-on-month

In the coal sector, the average mining price of small pieces of anthracite in Henan was 1223.48 yuan/ton in 24Q3, +2.2% compared to the second quarter; the average price of poor coal was 685.83 yuan/ton, +2.1% month-on-month. Q4 is expected to enter the “peak winter” coal consumption season, and coal demand is expected to continue to recover. In the electrolytic aluminum sector, the domestic spot aluminum price was 0.0196 million yuan/ton in 24Q3, -4.77%. The average domestic price of alumina during the same period was 3939.28 yuan/ton, an increase of 7.47% over the same period in Q2. The rise in alumina prices had a certain impact on the company's performance. Macro improvements in the fourth quarter drove demand growth. On October 22, 2024, the average domestic price of electrolytic aluminum was 0.0208 million yuan/ton, up from the previous month in Q3. In the aluminum processing sector, at the end of August 2024, all Shenhuo New Materials Phase II new energy power battery material projects with an annual output of 0.06 million tons were put into operation. The company is actively promoting the spin-off and listing of Shenhuo New Materials to promote the independent growth of the aluminum processing sector.

Focus on shareholder returns, with an interim dividend of 0.675 billion yuan

According to the 2024 mid-term profit distribution plan, the company plans to distribute a cash dividend of 3.00 yuan (tax included) to all shareholders for every 10 shares, for a total cash distribution of 0.675 billion yuan, accounting for 19.07% of net profit returned to mother for the first three quarters of 2024. The company insists on dividends, taking into account the capital requirements for sustainable development and the immediate and long-term interests of shareholders.

Investment advice

We expect the company's net profit to be 4.95/5.65/6.43 billion yuan in 2024-2026 (previous value was 4.89/5.97/6.76 billion yuan), and the corresponding PE is 8.5/7.4/6.5 times, respectively, to maintain a “buy” rating.

Risk warning

Prices of coal and aluminum fluctuated greatly; raw material and energy costs increased dramatically; production capacity release fell short of expectations, etc.