2025-08-31 16:21Summary of Aluminum Corp. of China (Chalco) Earnings Review Company Overview - Company: Aluminum Corp. of China (Chalco) - Stock Ticker: 2600.HK - Market Cap: HK$117.4 billion / $15.1 billion - Industry: Basic Materials, specifically aluminum and alumina production Key Financial Highlights - 1H25 Net Profit: Rmb7.1 billion, EPS of Rmb0.412, up 1% YoY [1] - Recurring Net Profit Estimate: Rmb6.7 billion, up 2% YoY, inline with estimates [1] - Interim Dividend: Rmb0.123 per share, 30% payout ratio, higher than 20% in 1H24 [1] - Revenue Growth: 5% YoY to Rmb116.4 billion in 1H25 [35] - Free Cash Flow (FCF): Dropped 37% YoY to Rmb9.5 billion [30] Earnings Estimates Revision - Earnings Estimates for 2025-26: Revised up by 11-15% due to higher alumina profit, despite lower aluminum profit [2] - Projected Recurring Net Profit: Rmb13.3 billion in 2025E and Rmb14.0 billion in 2026E [2] - Free Cash Flow Yield: Expected to reach 22% for 2025-26E [2] Segment Performance - Aluminum Segment: Contributed 55% of total gross profit, increased by 3% YoY, but below expectations due to lower realized ASP and higher COGS [26] - Alumina Segment: Contributed 40% of total gross profit, up 19% YoY, driven by higher realized ASP [27] - Energy and Trading Segment: Contributed 5% of total gross profit, down 65% YoY due to lower margins [28] Cost and Pricing Dynamics - Unit Operating Cost: Increased by 3% YoY for aluminum, 9% above estimates [26] - Realized ASP for Aluminum: Declined by 2% YoY, while alumina ASP increased by 2% YoY [26][27] - Projected Alumina Production Volume: Revised up by 9% for 2026E [24] Valuation and Price Target - 12-Month Price Target: HK$7.60 (from HK$6.30) and Rmb8.00 (from Rmb6.80) [2] - P/E Ratios: Expected to be 6.2 in 2024, rising to 9.6 by 2027 [14] - P/B Ratios: Expected to be 1.1 in 2024, rising to 1.1 by 2027 [14] Risks and Considerations - Downside Risks: Lower aluminum and alumina pricing, removal of capacity caps, slower green demand, and higher supply from recycled aluminum [32][42] - Upside Risks: Higher pricing driven by better supply-demand balance and enhanced capacity caps [33][43] Conclusion - Investment Rating: Maintain Buy/Neutral on Chalco-H/A, with strong earnings outlook supported by elevated industry spreads and robust alumina demand [39]