2024 results and 1Q25 forecasts in line with market expectations

Tianshan Aluminum Group announced its 2024 results: Revenue fell 3.06% YoY to Rmb28.09bn, attributable net profit increased 102.03% YoY to Rmb4.46bn, and recurring net profit increased 128.8% YoY to Rmb4.31bn. In 4Q24, revenue rose 9.99% YoY and 4.04% QoQ to Rmb7.29bn, and attributable net profit grew 141.43% YoY and 35.72% QoQ to Rmb1.37bn. In 1Q25, the firm estimates that attributable net profit rose 46% YoY and fell 23% QoQ to Rmb1.05bn. The firm's 2024 results and 1Q25 earnings forecasts are in line with market expectations. We attribute the YoY earnings growth in 2024 to increased sales volume and prices of the firm's electrolytic aluminum and alumina products. The firm projected QoQ decline in 1Q25 earnings, which we attribute to falling product prices.

Trends to watch 2024 earnings hit a record high due to increased sales volume and

prices of aluminum products. In 2024, the firm's electrolytic aluminum output rose 0.89% YoY to 1.18mnt, and alumina output rose 7.55% YoY to 2.28mnt. According to corporate filings, the average selling price (ASP) of electrolytic aluminum rose 5.73% YoY to Rmb19,767/t and that of alumina increased 39.5% YoY to about Rmb3,960/t in 2024. In 2024, costs of electrolytic aluminum and alumina rose 3.61% and 1.96% YoY, but the growth in ASP was faster than the growth in costs. Therefore, the firm’s profit surged in 2024.

The firm continues to strengthen integrated presence in upstream and downstream sectors to create cost advantage. It continues to

strengthen the supply of its self-owned mines. According to corporate filings, the firm's first batch of bauxite from Guinea was shipped to China at end-2024; its bauxite mine in Guangxi obtained mining licenses in April 2024; and its bauxite mine in Indonesia completed the handover in 2024.

Its annual bauxite supply capacity totaled 12mnt.

For midstream operations, the firm plans to commence construction of an additional electrolytic aluminum project with 240,000t/yr capacity in 2025.

The 2mnt/yr alumina project in Indonesia has passed environmental　　assessment in early 2025 and is scheduled to start construction in 3Q25.

The firm plans to put the 1mnt capacity in Phase I into operation in 2027.

Regarding downstream processing, the firm plans to complete equipment installation, commissioning, and capacity ramp-up for its deep-processing aluminum foil project with capacity of 160,000t/yr in 2025.

Asset structure improving; commitment to high dividends highlights

long-term investment value. In 2024, the firm's debt ratio hit a new low of 52.74% (-5.04ppt YoY) since its IPO. Its financial expenses fell 10.24% YoY and operating cash flow rose 33.29% YoY, exceeding Rmb5bn for the first time. In 2024, the firm's dividend payout ratio rose 10.02ppt YoY to 41.42%. According to corporate filings, the firm has released its dividend payment scheme for 2025-2027, committing to an annual dividend payout ratio of no less than 30%. In addition, the firm is conducting share buybacks (accounting for 0.43%-0.64% of its total share capital), and it plans to use the repurchased shares to implement employee stock ownership plans or equity incentive plans.

Financials and valuation

Due to the decline in per-tonne aluminum profit, we cut our 2025 net profit forecast 5.3% to Rmb4.06bn and introduce our 2026 net profit forecast of Rmb4.53bn. The stock is trading at 8.4x 2025e and 7.5x 2026e P/E. We maintain an OUTPERFORM rating. Given earnings forecast revisions, we lower our TP 5.3% to Rmb9.59, implying 11x 2025e and 9.8x 2026e P/E with 30.5% upside.

Risks

Disappointing global economic recovery and/or pro-growth policies; sharp fluctuations in aluminum product prices.