UBS: Maintaining Aluminum China's (02600) H share “buy” rating and target price of HK$12.8, profit slightly better than expected in the third quarter

The Zhitong Finance App learned that UBS released a research report stating that it will maintain the “buy” rating of China Aluminum (02600) H shares and a target price of HK$12.8. The company's third-quarter results were broadly in line with expectations. Net profit was 6.044 billion yuan (same below), down 5% from quarter to quarter and up 59% year on year, 3% higher than the bank's forecast of 5.885 billion yuan. The profit for the first nine months of this year was equivalent to 78% and 81% of the bank's and market's full-year forecasts, respectively.

The bank pointed out that the company's aluminum sales remained stable, reaching 2.08 million tons, an increase of 2% over the previous year. The industry's cash spread narrowed by 600 yuan/ton on a quarterly basis, but it was still 3,200 yuan/ton higher than the same period last year. Profit margins in the Yunnan region remained stable despite weak aluminum prices. As lower electricity prices during the rainy season largely offset price pressure, profit margins in the third quarter were roughly the same as in the first half of the year.

In terms of alumina, the company's production remained low, at 5.04 million tons, down 10% from the previous year. The industry's profit margins continue to be under pressure, mainly due to rising freight rates supporting bauxite costs, while alumina prices fell by about 20 yuan from quarter to quarter, and smelters were close to the balance of payments.

The bank expects investors to respond positively to the company's performance, believing that the company has once again recorded steady quarterly results, further confirming the continued stability of profit delivery in the first nine months of this year.