UBS has issued a research report maintaining a "Buy" rating and a target price of HK$12.8 on Aluminum Corporation of China Limited (02600.HK) H shares.
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 the 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. The industry's cash spread narrowed by RMB 600 per tonne quarter-on-quarter but was still RMB 3,200 per tonne higher than the same period last year. Margins in the Yunnan region remained stable despite softer aluminum prices, as lower electricity rates during the rainy season largely offset price pressure, 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, mainly due to rising freight costs supporting bauxite costs, 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 the company has once again delivered a solid quarterly performance, further confirming the sustained stability of earnings delivery in the first nine months of the year.
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