UBS has released a research report maintaining a "Buy" rating on Aluminum Corporation of China Limited (CHALCO) (02600) H-shares with a target price of HK$12.8.
The company's third-quarter results were broadly in line with expectations, with net profit of RMB 6.044 billion, down 5% quarter-on-quarter but up 59% year-on-year, coming in 3% above the bank's forecast of RMB 5.885 billion.
Earnings for the first nine months of this year represent 78% and 81% of the bank's and the market's full-year forecasts, respectively.
The bank noted that the company's aluminum sales volume remained stable at 2.08 million tonnes, up 2% year-on-year.
Industry cash margins narrowed by RMB 600 per tonne quarter-on-quarter but were still RMB 3,200 per tonne higher than the same period last year.
Profit margins in the Yunnan region remained stable despite softer aluminum prices, as lower electricity rates during the rainy season largely offset pricing pressure, keeping third-quarter margins broadly flat compared with the first half.
On the alumina front, the company's output remained at a low level of 5.04 million tonnes, down 10% year-on-year.
Industry margins continued to face pressure, mainly due to rising freight costs supporting bauxite costs, while alumina prices fell by about RMB 20 quarter-on-quarter, leaving smelters near break-even.
The bank expects investors to react positively to the company's results, believing that the company has once again delivered a solid quarterly performance, further confirming consistent and stable earnings delivery over the first nine months of the year.
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