Aluminum Corporation of China Limited (Chalco) is an aluminum producer with operations in bauxite and coal mining, alumina refining and primary aluminum smelting. The company operates through alumina segment, including the mining and purchasing of bauxite and other raw materials, and production and sale of alumina, as well as alumina-related products; primary aluminum segment includes the procurement of alumina, other raw materials, supplemental materials and electricity power, the production and sale of primary aluminum and aluminum-related products; trading segment is engaged in the trading of alumina, primary aluminum, other non-ferrous metal products, and crude fuels; energy segment includes coal mining and power generation, including conventional coal-fired power generation and renewable energy generation, such as wind power and photovoltaic power, and corporate and other operating segment includes corporate and other aluminum-related research, development, and other activities.
China started to release national metal reserves to curb the skyrocketing metal prices. However, the first batch of aluminum sales was announced at 50,000 tonnes, which was lower than expected. Meanwhile, the National Energy Administration proposed to nudge trials of distributed photovoltaic development on rooftops across counties and cities in China. The plan will drive demand for aluminum as well.
The correction of aluminum futures stabilized recently. As of 24th June, Shanghai Changjiang aluminum spot price closed at RMB18,650/tonne, down 6.8% from the peak in early May. And the recent low was RMB18,250/tonne.
The stock has relatively high aluminium beta (regression against aluminium futures). The market estimates of aluminium prices range averages at US$2,400/tonne. Based on the regression model and the average estimate, the implied stock price is HK$5.18.
Market consensus of net profit growth in FY21 and FY22 are 626.1% YoY and 32% YoY, which implies forward PERs of 18.9x and 16.7x. Current PER is 48.4x. Bloomberg consensus average 12-month target price is HK$5.54.