Yunnan Aluminum Co., Ltd. (000807): Cost Reduction and Efficiency Reversal Layout Enters Profit Recovery Period

Yunnan Aluminum Co., Ltd. (000807): Cost Reduction and 重庆耍耍网 Efficiency Reversal Layout Enters Profit Recovery Period

Event 2019 semi-annual results increase, net profit1.

The company raised 6.2 billion US dollars by 236%. The company released a performance forecast on July 15, 2019, and disclosed that the net profit attributable to shareholders of listed companies for the first half of 2019 was about 162 million yuan, an increase of about 236% over the same period last year and 4,826 in the same period last year.

440,000 yuan.

Basic income is 0.

06 yuan, 0 in the same period last year.

02 yuan.

The report reports that the domestic aluminum market is gradually recovering, and the domestic and international aluminum market prices are gradually stabilizing. The company tightly seizes the aluminum market and policy changes, accurately implements internal potential tapping 南京桑拿网 and cost reduction and efficiency measures, strengthens sales by production, and improves alumina.And boron carbon self-production and scientifically adjust the procurement strategy to reduce the company’s bulk raw materials such as alumina and boron carbon.

Rising product prices and falling raw material costs promoted the company’s first-half net profit.

A brief comment on the layout of reducing costs and increasing efficiency, and entering the profit repair period, the price of electrolytic aluminum bottomed out, and the supply and demand layout turned.

The company currently operates hydropower aluminum production capacity of about 214, and its revenue and net profit are highly dependent on changes in electrolytic aluminum prices.

In the first half of the year, the price of aluminum increased by 13,590 yuan / ton.

2% to 14155 yuan / ton, outperformed all the non-ferrous metals in the previous period by 9 substitutions, quoting other non-ferrous metals aluminum prices exceeded expectations.

Due to the reduction of 526 cases of capacity reduction in the supply-side reform of the electrolytic aluminum industry since 2016, the high growth rate of production capacity was terminated in 2019, and the output showed a negative growth for the first time in ten years. The output of electrolytic aluminum in the first half of the year gradually decreased to 0,786.

76%.

Demand has maintained steady growth, real estate construction’s demand for aluminum strips, and UHV power transmission’s demand for steel-cored aluminum stranded wires have led to an annual increase in aluminum construction in the first half of the year.

The supply and demand pattern is distorted, and the price of electrolytic aluminum is out of the repair market.

The price of raw materials peaked, and the advantages of hydropower became apparent.

The company’s alumina production capacity is 140, the self-sufficiency rate is 37%, and the carbon production capacity is 60, the self-sufficiency rate is 56%.

All electric power uses hydropower from the local power grid in Yunnan, and electricity costs have maintained a long-term downward trend since 2013.

In 2019, the price of raw materials entered a downward cycle, and alumina dropped by 10 in the first half of the year.

5%, anode carbon decreased by 12.
.

8%. At the beginning of the year, the company’s power cost plan dropped to zero.

33 yuan per kilowatt hour.

The overall decline in original costs directly caused the company’s profit to increase by 236%, and the second quarter profit1.

3.6 billion, a 423% increase from Q1.

With a counter-cyclical layout, production capacity has entered a release period.

The company is located in Yunnan and has abundant hydropower resources. Southwest China has become the core destination for this electrolytic aluminum capacity transfer.

The company’s revenue location has advantages in resources. Since 2017, it has deployed 200 cathode electrolytic aluminum capacity against the trend. In 2019, Shaotong Ludian Haixin Aluminum has increased the throughput of Phase I 35 and put it into production, and Dali Heqing Yixin Aluminum has Phase 21.

04 Initial production capacity is put into production, and there will be 100 annual production capacity put into operation in 2020-2021.

In the context of the national electrolytic aluminum capacity reduction, Yunnan Aluminum’s counter-cyclical layout will gradually enter a rich period of performance harvesting.

Yunnan Aluminum Co., Ltd. deployed its hydropower aluminum capacity against the trend, converted the price of alumina and auxiliary materials in the third quarter to gradually decline, and replaced it with deterministic growth in the second half of the year.

It is recommended to pay attention to the investment opportunities brought by the recovery of Yunalumi’s performance.

Taking into account the improvement in the supply and demand structure of electrolytic aluminum and the drop in the price of alumina, the company is given an overweight rating. In 2019, it is estimated to be 34 times PE and the 6-month target price is 5.

44 yuan.

Profit forecast and investment suggestion The company will lay out hydropower aluminum capacity against the trend, and it will build and put into operation a total of 323 electrolytic aluminum after 2020. It will continue to benefit from low-cost electricity and stable, compliant power supply layout brought by hydropower energy.

It is expected that the price of alumina will gradually decline in 2019 and gradually fall to around 2700 yuan.

After the supply-side reform of China’s electrolytic aluminum industry in 2017, the growth rate of domestic electrolytic aluminum in 2018 was zero.
5%, the compound growth rate of supply in the next few years is about 3.
7%, and demand will maintain a steady growth of 5-7%, after 2019 the oversupply situation will turn around.

In 2019, the company’s new production is gradually released. Based on the aluminum price of 13,900 yuan, 185 purchases of electrolytic aluminum production and 0.

The 33 yuan power cost will bring about 4 to the company.

07 billion net profit.

We expect the company’s revenue to be 225 from 2019 to 2021.

950,000 yuan, 288.

26 ppm and 374.

310,000 yuan, an increase of 18% in ten years, 12.

6% and 29.

9%; net profit attributable to mother 4.

07 billion, 8.

35 ppm and 15.

110,000 yuan, an increase of -127 in ten years.

8%, 105.

1% and 80.

9%; EPS per share are 0.

16 yuan, 0.

32 yuan and 0.

58 yuan.

The absolute net assets are 3 respectively.

34 yuan, 3.

64 yuan and 4.

11 yuan.

The corresponding PE from 2019 to 2021 is 29.

1 times, 14.

2 times and 7.

8 times, PB is 1.

4 times, 1.

2 times and 1.

1 times.

Taking into account the improvement in the supply and demand structure of electrolytic aluminum and the drop in the price of alumina, the company is given an overweight rating. In 2019, it is estimated to be 34 times PE and the 6-month target price is 5.

44 yuan.

Risk analysis Inventory losses and potential risks caused by the rapid decline in aluminum prices.

Alumina prices are affected by the short-term start-up and replacement of large-scale overseas alumina plants. The rise in prices has caused some of the profits of electrolytic aluminum without alumina production capacity to be squeezed further.

Yunnan’s electricity price policy has changed, and more energy-consuming industries have previously caused changes in electricity supply and demand.