Mingtai Aluminum Co., Ltd. Joins South Rail Transit Project to Transform High-end Aluminum Processing Enterprise

Performance has growth, the market has expected difference, give Buy rating! The company used to be an aluminum processing company positioned in the low-end aluminum foil and foil market. Its gross profit margin is only 7%, while the industry's average gross margin is about 18%. Since 2014, the company has been actively transforming from low-end aluminum foil and foil producers to high-end aluminum sheet and aluminum converters for transportation. By then, the company's production capacity and profitability will have a significant increase, performance growth, but the market has not fully understood this. According to our calculations, if the company invests in an annual production of 200,000 tons of aluminum strips for transportation projects and plans to release production capacity through the non-public issuance of annual output of 20,000 tons of aluminum profiles for traffic, it is expected that the company's 2015-2017 EPS will reach 0.51, 0.71, and 1.11 yuan, respectively, with year-on-year growth rates of 15%, 40%, and 56%, respectively. The dynamic price-earnings ratio based on the closing price on October 26, 2015 is divided into 25, 18, and 12 times respectively. . The 2016 average price-earnings ratio of listed companies in the A-share aluminum processing sector was 29 times. Taking into account the growth of the company and the expansion of its expansion in the field of aluminum deep processing through expansion, we believe that it is possible to give Mingtai Aluminum 2016 26 times PE, corresponding to The target price is 18.5 yuan and there is still 45% upside, giving a "buy" rating.

The annual output of 200,000 tons of high-precision aluminum strips for transportation projects has entered the trial production stage, and China's automotive aluminum market has exceeded 75.0 billion yuan. The project will make up for the gap in the production of 2xxx, 6xxx and 7xxx hard aluminum alloys, enabling the company to enter the automotive aluminum market. The company has obtained the ISO TS169492009 quality management system certification issued by the SGS certification body, and the production line has also been Trial production began in July 2015 and it is expected that the fourth quarter of this year will gradually release performance. With energy saving and environmental protection and lighter vehicle requirements, it is expected that by 2020, China’s average aluminum consumption per passenger vehicle will reach 150 kg. Assuming that the annual automobile production is 25 million, the corresponding aluminum demand is 3.75 million tons. / Year, the market space is about 75 billion yuan.

Together with the South Rail Transit project, it will enter the rail transit aluminum profile market and enjoy geographical advantages. It is expected to give priority to the supply of nearly 10 billion yuan in the Central Plains region. The biggest opportunity for Mingtai Aluminum is to reach a strategic cooperation with CSR Qingdao Sifang: 1. CSR Sifang will export professional technology and quality standards to Mingtai Aluminum to help Mingtai Aluminum become qualified suppliers of aluminum profiles and aluminum plates. 2. The company and CSR Quartet jointly established Zhengzhou CSR, which will form a 500-kilometer/year rail vehicle production capacity in the future, and will also undertake the maintenance work for the EMU in the Central Plains region; 3. The company will become a supplier to Zhengzhou CSR Sifang. Has priority delivery rights. The construction of high-speed rail and rail transit in the entire central region is relatively backward, and there is still a lot of room for growth. According to incomplete statistics, by 2020, the aluminum market space required for railcar bodies in the Central Plains will be 8.6 billion yuan. There is only one manufacturer in Luoyang Midas in Henan Province. In the future, the company is expected to give priority to Midas Market together with Midas. According to the company's own calculations, the company's investment in the "annual production of 20,000 tons of traffic aluminum profile project" will reach a net profit of 188 million yuan per year.

Equity incentives are strong and cover a wide range. On December 15, 2014, the company granted a total of 184 incentive objects, including general managers, deputy general managers, board secretaries, financial controllers, middle management staff, and other key employees, to a total of 16.756 million restricted shares, which accounted for the company 4.8% of the total share capital before the issue, and the grant price is 6 yuan/share. The equity incentive is large and covers a wide range of areas, which can fully mobilize the enthusiasm of the management and core staff.