The deleveraging of nonferrous metal industry is still on the way, the high beta attribute continues, and macroeconomic expectations and liquidity fluctuations still have a great impact on the sector. Continue to recommend electrolytic aluminum, lithium resources and the the Belt and Road plate.

1、 Take the lead in welcoming the configuration value

Non ferrous metal plate deleveraging is still on the way, and high beta continues. At the current time point, the asset liability ratio of listed companies in the nonferrous metal industry that have disclosed their annual reports is 40.8% on average, down 2% from the end of 2015. From the perspective of the balance sheet, the non-ferrous metal sector still has a high beta, and the fluctuations in macroeconomic expectations and credit expectations still have a large impact on the non-ferrous metal sector. We believe that listed companies that are relatively fast in deleveraging and achieve sustainable profitability are expected to take the lead in welcoming the allocation value.

Continue to recommend electrolytic aluminum plate. Last week, the price of base metals was mixed, copper fell 0.8%, aluminum rose 1.5% and zinc rose 1%. Maintain the short-term demand is not poor, and the medium and long-term raw material costs (mine grade and recoverable resources, coal, electricity, alumina, etc.) push up the metal price judgment, so as to promote the electrolytic aluminum plate with strong supply side reform expectation and the copper plate with reverse concentrate supply and demand. Maintain the overweight rating: Yunnan Aluminum (8.63+0.23%, buy), Aluminum Corporation of China (4.80-0.62%, buy), Tongling Nonferrous (2.82+0.36%, buy); Beneficial objects: Luoyang Molybdenum Industry (4.25+0.47%, buy), Zijin Mining (3.35-0.30%, buy), Jiangxi Copper (16.17+1.83%, buy), Yunnan Copper (12.71+1.60%, buy), etc.

2、 Analysis of sub industries

Lithium battery raw materials: the upstream sector is still the sector with the most clear demand pattern and the least supply elasticity. The supply and demand of lithium concentrate remained tight in the first half of the year, and the price of lithium carbonate/lithium hydroxide remained high. The demand for cobalt trioxide is improving, and the cobalt price will continue to rise. It is expected that the rare earth blackout and storage will gradually strengthen, which will benefit the rising price of high-end permanent magnets. Ratings of overweight: Tianqi Lithium (46.47+5.11%, buy), Ganfeng Lithium (40.95+9.20%, buy), Zhongke Third Ring (13.40-1.18%, buy), Zhenghai Magnetic (10.28-1.34%, buy); Target beneficiaries: Luoyang Molybdenum Industry and Huayou Cobalt Industry (46.30+3.67%, purchase).

Theme of the the Belt and Road: We believe that the implementation of the the Belt and Road strategy is expected to substantially promote resource development and capacity cooperation between Chinese enterprises and countries along the Belt and Road. It is recommended that NFC (7.69+1.05%, buy), Jincheng (17.89+0.06%, buy) (the leading mining enterprises enjoy the recovery of the nonferrous industry, and the current price is close to the share price held by employees recently), Tibet Everest (35.98+0.95%, buy), and China Mining Resources (23.99-1.07%, buy). Theme of aviation and military materials: C919 has obtained the release license, and the prospect of subsequent aviation materials localization market is broad. Ratings of shareholding increase: Gangyan Gaona (17.12-0.41%, buy), Yinbang Shares (8.19-0.49%, buy).