2025-11-03 02:36Summary of Aluminum Corp of China (Chalco) Conference Call Company Overview - Company: Aluminum Corp of China (Chalco) - Ticker: 2600 HK / 601600 CH Key Financial Results - 3Q25 Earnings: Reported earnings of RMB 3.8 billion, representing an increase of 8% quarter-on-quarter (q-o-q) and 90% year-on-year (y-o-y) [1] - Sales Volume: Both alumina and aluminum sales volumes rose slightly by 1% y-o-y [1] - Alumina Prices: Increased by 3% q-o-q but decreased by 20% y-o-y [1] - Aluminum Prices: Rose by 2% q-o-q and 6% y-o-y [1] - Revenue: Flat q-o-q, but gross profit improved significantly due to lower production costs, primarily from cheaper bauxite [1] - SG&A Expenses: Declined by 13% y-o-y due to effective cost control [1] Production and Cost Guidance - Bauxite Production: Guinea's Boffa mine is ramping up steadily, with a target of approximately 10% y-o-y production growth for 2025 and a self-sufficiency ratio of around 60% [2] - Cost Advantage: Estimated cost advantage of RMB 100 per ton for self-mined bauxite compared to imported ore [2] - Cost Guidance: - Aluminum all-in cost below RMB 15,000 per ton in 3Q25; electricity cost between RMB 0.44 and 0.45 per kWh [2] - Alumina cash cost below RMB 2,700 per ton in 3Q25, trending lower excluding bauxite [2] - Capex: Management revised capital expenditure guidance to RMB 15 billion for 2025 from a previous estimate of RMB 20 billion [2] Market Outlook - Aluminum Price Outlook: Expected to remain elevated through 4Q25 to 2026, while alumina prices may remain weak due to rising domestic and imported supply [2] - Global Market Dynamics: Favorable conditions due to supply disruptions at Century Aluminum's Nordural smelter in Iceland and South32's Mozal smelter in Mozambique, combined with China's production ceiling of 45 million tons and low inventories [3] - Policy Support: "Anti-involution" production discipline is expected to reinforce price stability and profitability [3] Investment Recommendations - Rating: Maintain Buy rating on Chalco's H/A shares, viewing the company as a key beneficiary of strong aluminum fundamentals and improving margins [4] - Target Prices: - Raised target price for H-share to HKD 11.40 from HKD 7.70, implying a 24% upside [4] - Raised target price for A-share to RMB 11.30 from RMB 10.50, implying a 20% upside [4] Financial Projections - Earnings Estimates: Revised earnings estimates up by 18% for 2025, 18% for 2026, and 14% for 2027 [19] - EPS Projections: Expected EPS of RMB 0.87 for 2025, RMB 1.03 for 2026, and RMB 1.05 for 2027 [7][20] Risks and Considerations - Downside Risks: - Lower-than-expected demand from property completions - New regulations leading to higher production costs - Potential bauxite supply disruptions - Geopolitical risks related to overseas resource acquisitions [23] Additional Insights - Coal Business: Contributed approximately 4% of total revenue in 2024, primarily for energy security; no plans to increase investment in coal-related business as the company focuses on renewable energy [22] This summary encapsulates the key points from the conference call regarding Aluminum Corp of China, highlighting financial performance, market outlook, investment recommendations, and associated risks.