Industrial: Aluminum sector profits continue to rise, bullish on electrolytic aluminum valuation repair market.

Industrial Research Report states that in the first half of 2024, the profit of the aluminum sector increased year-on-year. The rise in aluminum prices drove profits upwards, with significant growth in the performance of electrolytic aluminum companies and a rebound in the performance of aluminum processing companies. In the second quarter of 2024, the aluminum price spread between domestic and international markets narrowed under the expectation of overseas inventory replenishment, leading to an increase in export profits and growth compared to the previous year. At the same time, the growth in new energy and aluminum for power use offset the decline in aluminum for real estate. Looking ahead, expectations for improved demand in the strong season of September and October exist, while the supply side remains stable. There is a possibility of further increase in aluminum prices and improved profitability of electrolytic aluminum. In the long term, with limited increase in electrolytic aluminum production capacity and demand steadily growing due to structural upgrades, related companies are expected to maintain high profitability in the future. In the first half of 2024, profits in the aluminum sector increased year-on-year, with a significant increase in the quarter-on-quarter growth rate. Since March 2024, aluminum prices have continued to rise, bringing industry profitability levels to a high point. This has led to an improvement in the performance of listed companies in the aluminum sector in the first half of 2024, with significant growth in both year-on-year and quarter-on-quarter results. The revenue and net profit growth of aluminum sector companies year-on-year in the first half of 2024 were 0.0% and +46.7% respectively. In the second quarter of 2024, company revenue and net profit growth were +6.0% and +84.3% respectively, with quarter-on-quarter growth of +20.2% and +66.5%. The increase in aluminum prices in the first half of 2024 drove profit growth, with significant growth in the performance of electrolytic aluminum companies year-on-year, particularly in the second quarter of 2024. The production of electrolytic aluminum by Aluminum Corporation Of China, Yunnan Aluminium, Henan Shenhuo Coal & Power, and Tianshan Aluminum Group in the first half of 2024 was 363, 135, 75, and 59 thousand tons respectively, with year-on-year growth rates of +18.63%, +38.7%, +3.2%, and +1.3% respectively. Due to early resumption of production in Yunnan at the beginning of the year, the production of Aluminum Corporation Of China, Yunnan Aluminium, and Henan Shenhuo Coal & Power increased. The calculated gross profit per ton of electrolytic aluminum for Aluminum Corporation Of China, Yunnan Aluminium, Henan Shenhuo Coal & Power, and Tianshan Aluminum Group were 2116, 2786, 4058, and 3682 yuan respectively, with year-on-year changes of +850, +9, +236, and +630 yuan. Benefiting from the rise in aluminum prices, the profit per ton of electrolytic aluminum companies increased, with Aluminum Corporation Of China seeing the highest increase. This was mainly due to its self-sufficiency in alumina and high self-sufficiency in bauxite, allowing it to benefit fully from the rise in aluminum prices against the backdrop of increasing bauxite and alumina prices in the first half of the year. Additionally, Tianshan Aluminum Group is theoretically 100% self-sufficient in alumina, but since alumina is sold separately, the increased profitability is reflected in alumina products rather than in consolidated calculations. In the first half of 2024, the performance of aluminum processing companies improved, with a quarter-on-quarter improvement in the second quarter. Processing fees gradually stabilized in the first half of 2024, with the aluminum price spread between domestic and international markets narrowing under the expectation of overseas inventory replenishment in the second quarter. This led to an increase in export profits and growth compared to the previous year, while the growth in new energy and aluminum for power use offset the decline in aluminum for real estate. Therefore, the performance of aluminum processing companies improved in the first half of 2024. Looking at the second quarter, benefiting from the growth in traditional peak season demand, the performance of aluminum processing companies improved for the most part quarter-on-quarter. Additionally, with higher growth in external demand and the narrowing of the aluminum price spread, companies with a high proportion of export business, such as Henan Mingtai Al. Industrial and Jiangsu Dingsheng New Materials Joint-Stock, benefited more. Investment Recommendation: Sector profits continue to rise, with a positive outlook for the valuation recovery trend in electrolytic aluminum. Looking ahead, expectations for improved demand in the strong season of September and October exist, while the supply side remains stable. There is a possibility of further increase in aluminum prices and improved profitability of electrolytic aluminum. Furthermore, with continued tight supply of bauxite and low inventory levels of alumina, alumina spot prices remain firm, positioning aluminum companies with integrated aluminum industry chains to continue benefiting. In the long term, with limited increase in electrolytic aluminum production capacity and demand steadily growing due to structural upgrades, related companies are expected to maintain high profitability, and as balance sheets are further repaired, aluminum companies may continue to increase dividends. Recommended companies to watch include Aluminum Corporation Of China (601600.SH), Tianshan Aluminum Group (002532.SZ), Yunnan Aluminium (000807.SZ), Henan Shenhuo Coal & Power (000933.SZ), and Shandong Nanshan Aluminium (600219.SH). Risk Warning: Lower-than-expected domestic economic recovery, global macroeconomic uncertainty, and unexpected rate hikes by the Federal Reserve.