TIANSHAN ALUMINUM(002532)2025-03-18 05:47Summary of Tianshan Aluminum Group Research Call Company Overview - Company: Tianshan Aluminum Group - Industry: Aluminum production - Location: Xinjiang, China - Smelting Capacity: 1.2 million tonnes Key Industry Insights - Aluminum Supply Discipline: The aluminum industry has seen a disciplined capital expenditure (capex) approach since the supply reform in 2017, with a 34% reduction in capex from previous levels [3][13] - Utilization Rate: The overall utilization rate in the aluminum sector is stabilizing at over 97% [3][12] - Direct Alloy Rate: China's molten aluminum direct alloy rate is expected to reach 90% by 2025, reducing ingot inventory in exchange warehouses [3][16] - Profit Margins: Aluminum smelters are projected to widen profit margins from 2025 onwards due to tight supply conditions [9][12] Company-Specific Growth Drivers - Upstream Integration: Tianshan is integrating with upstream bauxite sources in Guinea and Guangxi, which is expected to lower costs significantly [4][35] - New Capacity: The company plans to build an additional 200ktpa aluminum capacity, which is part of the remaining 400ktpa quota yet to be constructed in China [4][35] - Expansion Plans: Tianshan has long-term growth plans in Indonesia, targeting 2mtpa alumina capacity and three local bauxite mines [4][35] Financial Projections - Earnings Growth: Forecasted earnings growth of 11% in 2025 and 28% in 2026, driven by widening aluminum spreads and cost reductions from upstream integration [5][9] - Price Target: Initiated coverage with a price target of Rmb11.00, based on a historical average PE of 10x [5][7] - Revenue and Earnings Estimates: - 2025 Revenue: Rmb30.826 billion - 2025 Net Earnings: Rmb4.951 billion - 2025 EPS: Rmb1.06 [6] Valuation Metrics - Market Capitalization: Rmb43.8 billion (approximately US$6.04 billion) [7] - P/E Ratio: Expected to be 8.8x in 2025 [5][8] - Dividend Yield: Projected to increase to 4.5% in 2025 [6] Risks and Considerations - Bauxite Supply Issues: Delays in bauxite delivery could impact earnings; however, Tianshan is expected to meet its guidance in 2025 [36] - Debt Management: The company plans to reduce interest-bearing debt from Rmb20 billion to Rmb10 billion by 2026 [46][48] Conclusion - Investment Recommendation: Tianshan Aluminum Group is positioned favorably within the aluminum industry due to disciplined supply management, strategic upstream integration, and growth potential in both domestic and international markets. The company is recommended as a "Buy" based on its robust growth prospects and favorable valuation metrics [2][5][9]