Henan Zhongfu Industrial (SH:600595) Huachuang Securities·2025-08-18 13:05Investment Rating - The report gives a "Buy" rating for Zhongfu Industrial with a target price of 6.3 CNY [3][12]. Core Views - The company is positioned to benefit from increased electrolytic aluminum capacity and a decline in raw material costs, leading to improved profitability and asset quality [9][10]. - The company is set to initiate its first dividend in years, indicating a strong commitment to shareholder returns [10][46]. - The transition towards green electricity consumption in the electrolytic aluminum sector presents a significant competitive advantage for the company [10][11]. Financial Summary - Total revenue is projected to grow from 22,761 million CNY in 2024 to 27,764 million CNY by 2027, with a compound annual growth rate (CAGR) of approximately 4.7% [4]. - Net profit attributable to shareholders is expected to rebound from 704 million CNY in 2024 to 2,688 million CNY in 2027, reflecting a significant recovery [4]. - Earnings per share (EPS) is forecasted to increase from 0.18 CNY in 2024 to 0.67 CNY in 2027 [4]. Company Overview - Zhongfu Industrial is a veteran in the electrolytic aluminum industry, with a diversified business model encompassing coal, electricity, and aluminum processing [8][15]. - The company has undergone significant restructuring since 2021, improving its financial health and operational efficiency [8][17]. - As of 2024, the company has a production capacity of 690,000 tons of deep-processed aluminum and 750,000 tons of electrolytic aluminum, positioning it among the top players in China's aluminum sector [15][27]. Growth Drivers - The completion of 100% control over electrolytic aluminum assets is expected to enhance production capacity by 19.3% [10][58]. - The company is actively working on cost optimization through self-supplied electricity and high self-sufficiency in carbon materials [10][61]. - The upcoming regulatory changes regarding green electricity consumption in the electrolytic aluminum industry are anticipated to favor companies like Zhongfu that are investing in green energy solutions [10][11]. Dividend Policy - The company plans to distribute at least 60% of its distributable profits as cash dividends from 2025 to 2027, reflecting a strong commitment to returning value to shareholders [10][47]. - The expected dividend yield for 2025-2027 is projected to be between 2.5% and 7.7%, depending on the approach to covering past losses [10][50].