2024-10-21 00:32Investment Rating - The report maintains a "Buy" rating on Chalco and Hongqiao, indicating a positive outlook for these companies due to expected benefits from rising alumina prices [15][23][26]. Core Insights - China alumina prices are expected to remain strong due to tight bauxite and alumina supply, influenced by recent production cuts and adverse weather conditions affecting shipments [12][14]. - Chalco and Hongqiao, as vertically-integrated aluminum producers, are projected to benefit from higher alumina prices, with estimated net profit increases of 2% and 4% for 2024E, respectively, for a 5% rise in alumina prices [15][23]. - A 30-day Positive Catalyst Watch has been initiated for both Chalco and Hongqiao, reflecting the anticipated positive impact of strong alumina prices on their financial performance [15][23]. Summary by Sections Bauxite Supply - Following production cuts since November 2023, the government has begun approving production resumption for bauxite mines in Henan, but the process in Shanxi is slower. Stricter safety requirements may prevent output from returning to previous levels [13]. Alumina Price - As of October 14, 2024, the spot alumina price in China reached Rmb4,350 per ton, marking a 9.4% month-over-month increase and a 46.5% year-over-year increase. The alumina output in September 2024 was 6.91 million tons, reflecting a 2.69% year-over-year increase but a 4.27% month-over-month decrease due to tight bauxite supply and maintenance work [14]. Financial Projections for Chalco - The report revises Chalco's net profit estimates for 2024, 2025, and 2026 upwards by 44%, 23%, and 6% respectively, with new target prices set at HK$9.09 for H-shares and Rmb10.96 for A-shares [23][26]. Financial Projections for Hongqiao - Hongqiao's net profit estimates for 2024, 2025, and 2026 are revised upwards by 11%, 5%, and -6% respectively, with a new target price of HK$14.80 [23][26].