UBS has issued a research report maintaining a "Buy" rating on CHALCO (HKEX: 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 reaching 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 estimates, respectively.
The report notes 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 remained RMB 3,200 per tonne higher than the same period last year.
Margins in the Yunnan region stayed stable despite softer aluminum prices, as lower electricity tariffs during the rainy season largely offset price pressures, with third-quarter margins roughly flat compared to 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, primarily due to rising freight costs supporting bauxite expenses, while alumina prices fell by approximately RMB 20 quarter-on-quarter, leaving smelters near break-even.
The bank expects investors to react positively to the company's results, believing that another quarter of solid performance further confirms the consistent and stable earnings delivery over the first nine months of the year.
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