Rising aluminum prices have driven shares of aluminum companies to new highs, with industry consolidation accelerating. Analysts remain bullish on leading firms' future performance.
As aluminum prices continue to climb, several major aluminum producers have seen their stock prices reach multi-year peaks. Faced with dwindling domestic aluminum resources, carbon neutrality goals, energy efficiency demands, and overseas expansion needs, many companies are ramping up capacity integration and market value management. For instance, Shandong Hontron Aluminum Industry Holding Company Limited (002379.SZ) acquired aluminum assets from its major shareholder to advance green and low-carbon transformation. Meanwhile, Shandong Nanshan Aluminium Co., Ltd. (600219.SH) announced a special dividend to reward shareholders and signal confidence in long-term growth.
**Nanshan Aluminium’s Low Valuation** **Declining Alumina Prices Weigh on Earnings**
Since September 2024, the A-share market has rallied, with non-ferrous metals emerging as a key sector. Copper and aluminum price surges have propelled stocks, with some hitting all-time highs. Wind data shows that as of November 5, 15 out of 32 aluminum sector constituents under CITIC’s classification have surged over 50% year-to-date. Leaders include Henan Zhongfu Industrial Co., Ltd. (600595.SH), Yian Technology, and Shandong Hontron, up 147%, 129%, and 125%, respectively. Shandong Hontron, Tianshan Aluminum, and Shenhuo Shares also recently reached record highs.
Aluminum futures and spot prices have risen steadily this year, with Shanghai aluminum futures up around 9%. Over a longer horizon, aluminum prices have trended upward since 2016, climbing from 9,550 yuan/ton to 21,570 yuan/ton.
Futures research notes that the copper/aluminum price ratio recently exceeded 4, surpassing the decade average plus two standard deviations. Historically, when this ratio exceeds the mean by one standard deviation, aluminum tends to outperform copper. Currently, Shanghai copper and aluminum futures trade at 89,270 yuan/ton and 21,655 yuan/ton, respectively, yielding a 4.12 ratio.
Amid rising prices, most aluminum firms reported earnings growth. Nanshan Aluminium posted Q3 revenue of 26.325 billion yuan (+8.66% YoY) and net profit of 3.772 billion yuan (+8.09% YoY). Following a 460 million yuan interim dividend, the company proposed a special 3 billion yuan payout to "share growth with shareholders and underscore long-term confidence."
However, Nanshan’s alumina segment has struggled. Alumina futures plunged 42.6% this year, hitting record lows. After a Q3 rebound, prices resumed their downtrend, dropping 19% from August to November 4. Analysts attribute this to weak alumina prices dragging on earnings.
Nanshan’s valuation remains low in the sector, with a persistent price-to-book (PB) ratio below 1. Despite holding 27.4 billion yuan in cash against a 45.7 billion yuan market cap, its dividend yield stays under 5%. The company reiterated its commitment to shareholder returns, pledging a minimum 40% payout ratio from 2024–2026 and share buybacks.
Year-to-date, Nanshan’s stock has risen 24.8%, lagging peers. Investors contrast its performance with Hongqiao Group (177% gain), questioning differences in dividends and buybacks.
**Shandong Hontron’s Major Restructuring Pending** Shandong Hontron, linked to Hongqiao Group, primarily produces aluminum sheets and foils. Fierce competition and shrinking margins prompted plans to acquire Shandong Hongtuo Industrial, a global top-tier aluminum producer, from parent Shandong Hongqiao. Post-deal, Hontron aims to become a leading integrated manufacturer.
Hongtuo boasts a full aluminum supply chain, with 113.95 billion yuan in assets and 202.6 billion yuan in 2023 revenue. However, the Shenzhen Stock Exchange raised concerns over Hongtuo’s debt levels, environmental risks, and related-party transactions. Hontron’s debt-to-asset ratio would jump from 37.33% to 58.62% post-acquisition.
The deal’s 5.34 yuan/share issuance price contrasts with Hontron’s current 20.2 yuan/share, offering nearly 3x paper gains. Regulatory approval remains pending.
**Analysts’ Top Picks** While some institutional investors trimmed positions—such as reducing stakes in Nanshan Aluminium, Aluminum Corporation Of China Limited (601600.SH), and Shandong Hontron—analysts remain optimistic.
Jianxin Futures expects aluminum prices to stay resilient despite muted seasonal demand. Galaxy Securities highlights aluminum’s potential to outperform copper amid high price ratios. GF Futures cites macro tailwinds but cautions that high prices may curb downstream purchases.
Everbright Futures warns of limited upside as fundamentals take center stage, noting stagnant inventory drawdowns and buyer resistance. Key catalysts include year-end power grid and auto sector demand.
Oriental Securities favors Tianshan Aluminum for cost reductions and volume-price synergies by 2026, followed by Yunnan Aluminium and Henan Zhongfu. Guohai Securities recommends Hongqiao Group, Tianshan Aluminum, Shenhuo Shares, Aluminum Corporation Of China, and Yunnan Aluminium as "buys."
*(Mentioned stocks are for analysis only, not investment advice.)*
Comments