Aluminum Corporation of China, Ltd. or Chalco (ACH) announced higher revenues but lower earnings in 2007, mainly due to production increases in primary aluminum products and alumina price declines. Although the gloomy outlook for the worldwide economy in 2008 will continue to pressure the price of alumina and aluminum, Chalco should continue to benefit from strong alumina and aluminum demand in China. Chalco has an integrated industry chain to leverage the increasing demand of Aluminum in China.
The gloomy outlook for the worldwide economy in 2008 will continue to pressure the price of alumina and aluminum. We continue to view the company as having the best balanced value chain in China's aluminum industry. Chalco announced its financial results for year 2007. Under Chinese accounting rules, for 2007, its total revenue was RMB 76.18 billion, up 17.51% over 2006. Its net profit for 2007 was RMB10.23 billion, down 13.65% from 2006.
Moreover, the company plans to continue to aggressively increase its production capacity. Chalco's domestic acquisitions and offshore projects are also on the right track. EPS for 2007 was RMB 0.82 ($2.81 per ADS), down 21.15% over 2006. Given its overall positive prospects, we are maintaining our Buy recommendation on Chalco shares. Using a P/E multiple of 13x our fiscal year 2009 earnings per ADR estimate, yields a target price of $45, which we believe reflects the company's growth prospects.
Read the full analyst report on ACH.
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