According to a research report released by Zhongtai Securities, maintaining China's Hongqiao (01378) “buy” rating, the company achieved operating income of 136.2 billion yuan in 2023, an increase of 1% over the previous year; net profit of 11.5 billion yuan, an increase of 32% over the previous year. At the same time, a year-end dividend of HK$0.29 per share was declared. In addition to the interim dividend and special dividend, a total of HK$0.63 per share was distributed for 23 years.
The main views of Zhongtai Securities are as follows:
Electrolytic aluminum production, sales and profitability both increased
In '23, the company's aluminum alloy products (electrolytic aluminum) achieved gross profit of 16.456 billion yuan, an increase of 27% over the previous year. The increase in profit was due to increased production and sales and lower costs. In terms of production and sales, the company produced 6.265,000 tons of aluminum alloy, up 3.7% year on year; sales volume was 5.748 million tons, up 5.0% year on year. In terms of profit per ton, the unit sales price of aluminum alloy products fell 6.4% year on year, but under the decline in coal prices and anode prices, the cost reduction exceeded the selling price, and the cost per ton fell 11% year on year. As a result, the gross profit margin of aluminum alloy products in '23 was 17.4%, an increase of 3.9 pct over the same period last year.
The deep integration of the aluminum industry and clean energy is being promoted effectively.
The company began a capacity relocation plan in 2019 and plans to transfer nearly 2/3 of its production capacity to Yunnan. With the transfer of part of its production capacity to Yunnan, the company further increased the proportion of hydropower resources used, accelerated construction of new energy projects such as photovoltaic power generation, and continued collaborative layout of wind and water energy storage. The accelerated and deep integration of the aluminum industry and clean energy was effectively promoted, and the company's share of green energy continues to rise. Based on the calculation that Yunnan has an operating capacity of 1.5 million tons and that green power accounts for 90% of the province's energy, the company currently accounts for about 21% of green power energy.
Provide a guarantee of 10 billion dollars to promote the development of the Simandou iron ore project.
On March 6, '24, the company issued an announcement stating that Weiqiao Aluminoelectric agreed to fulfill all guarantee obligations for WCH on time and provide a total guarantee of no more than 1.78 billion US dollars for the Ximangdu iron ore project. In 2019, Win Alliance won the bid for the Simandou Iron Ore Block 1 and 2 project for US$14 billion. Simandou has a total resource volume of over 10 billion tons. Among them, the amount of iron ore resources is 2.25 billion tons. It has been proven that the grade of iron ore is about 66%-67%, and the annual output is expected to reach 150 million tons after production is put into operation. The company's guarantee for the project will advance the development of the Simandou iron ore project. The project is expected to be put into operation in 26 years, and will provide the company with considerable profits after commissioning.
Aluminum: There are profound changes on both the supply and demand sides, and the “resource-like” attributes of electrolytic aluminum will gradually become apparent. 2024 is the “first year of change” for electrolytic aluminum in the true sense of the word:
1) On the supply side, the domestic power supply conflict for electrolytic aluminum is not only about hydropower, but also depends on wind and solar energy storage. Electricity supply is naturally “vulnerable”; in the process of energy system transformation and new energy construction, traditional energy seriously reduces capital expenditure and raw material competition, which will eventually lead to a shortage of petroleum coke, another raw material for the production of electrolytic aluminum, a by-product of petroleum refining and chemical processing, and will have a more profound impact on global electrolytic aluminum production in the medium to long term.
2) On the demand side, traditional demand drag will slow down in the context of domestic building security and countercyclical adjustment. Demand for new energy sources (NEVs, photovoltaics, etc.) will drive a trend rebound in demand for electrolytic aluminum, and the overall impact is showing. Demand for aluminum electrolyte, the green metal, cannot be overly pessimistic — the average annual demand growth rate is likely to remain 2-3%.
3) At present, domestic electrolytic aluminum shows the characteristics of low inventory and high capacity utilization, and new supply will be heavily dependent on future new overseas production capacity. Under the new overseas capital cycle, the industry's capital expenditure costs and cycle will be greatly increased and lengthened, which will cause the price center of electrolytic aluminum to rise to 25,000 yuan/ton. The bank's judgment is that the electrolytic aluminum industry chain is either maintaining prosperity or showing a spiral rise. As prices are reshaped, the “resource-like” attributes of the electrolytic aluminum industry will also be re-understood.