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Analysis of Aluminum Corporation of China (#ACH)

Analysis of Aluminum Corporation of China (#ACH)

12 May 2021

Aluminum Corporation of China Limited is a state-owned aluminum company of the People’s Republic of China. It is the second largest producer of alumina and the third largest producer of primary aluminum. The company is mainly engaged in aluminum oxide mining, primary aluminum electrolysis, aluminum processing and production, as well as trade and engineering services.

The main competitors of #ACH are the world’s largest aluminum mining and processing companies Shandong Nanshan Aluminum, Rusal and Rio Tinto.

Revenue for 2020: ¥186.0 B (-2.2% compared to the previous year)

Operating profit for 2020: ¥6.5 B (+16% compared to the previous year)

Net profit for 2020: ¥741M (-13% compared to the previous year)

The increase in aluminum prices had a positive impact on the company’s financial performance during the pandemic

Distribution of revenue by business segment:

Trading – 60.50%

Original Aluminum Plate – 20.20%

Alumina Plate – 16.50%

Energy – 2.80%

The company has a simple and very clear business model. At the moment, the company’s management does not intend to pay cash flows to shareholders in the form of dividends. But, even despite this, the company’s stock prices have recently increased significantly. This is due to the strong growth in the commodities sector and the increase in the price of aluminum in particular. Most of the final products (more than 95%) are sold within the country, which eliminates various political risks associated with the company’s activities.

Thus, # ACH is one of the largest producers of alumina and primary aluminum with a clear business model and growth potential through business expansion. However, it is worth remembering that the confrontation between the US and China may lead to the delisting of the company’s shares with the NYSE. But analysts speak of this scenario as unlikely. Despite the potential growth of quotations, at the moment the company’s shares are above their fair value.

Now the company is more than in demand, a pronounced trend is visible. Ideally, try to buy from 14. Goals upwards are 19.50 and 23.50. However, it is not worth buying thoughtlessly, the stock depends too much on raw materials and on whether there will still be a ban on trading in Chinese stocks in America. Purchase no more than 10% of the portfolio.

12 May 2021
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