MS-Shandong Nanshan Aluminium Co. Preliminary 2024 Net Profit Below Expectation-20250120

Nanshan expects its FY24 net profit to increase by 30 - 40% YoY to Rmb4.5 -4.9bn. This implies 4Q24 net profit range of Rmb1.0 - 1.4bn, below our expectations despite 7% YoY and 75% YoY increase in aluminum and alumina prices in the quarter.In our view, the weak earnings was probably due to delay in realized alumina prices in 4Q24. Nanshan's alumina price in Indonesia lags spot prices by one month, which implies less earnings contribution in the quarter; 2) and possible impairment booked in the quarter.

Correction in alumina prices may weigh on earnings in 2025. Alumina prices have been falling entering Jan 2025 due to loosened supply. There are large amounts of new alumina capacity in the pipeline to start operation in 1Q25, which may result in continuous drop in alumina prices. This, together with the expected lower earnings contribution from the aluminum business due to capacity quota transfer and weak exports due to export tax rebate removal announced in mid-Nov last year, will likely drag on the company's earnings in 2025, in our view.