Intrinsic Value Aluminum Corporation of China Limited (601600.SS)

• Previous Close: $14.13
• Intrinsic Value: $4.15
• Upside potential: -71%

Stock Valuation Context

Business Model And Market Position

Aluminum Corporation of China Limited (Chalco) is a fully integrated state-owned enterprise operating within the global basic materials sector, specifically the aluminum industry. Its core revenue model is built on the entire aluminum value chain, encompassing the mining of bauxite, refining it into alumina, and smelting primary aluminum and alloys. The company further diversifies its operations through energy generation from thermal, wind, and solar sources, and a significant trading segment that handles various metals and coal. This vertical integration provides a measure of cost control and supply security, from raw material extraction to finished product sales. As a key player in China, the world's largest aluminum producer and consumer, Chalco holds a formidable market position. Its scale and government backing afford it substantial influence over domestic supply and pricing dynamics, though it operates in a highly cyclical industry sensitive to global commodity prices and energy costs. The company's extensive operations, including logistics and R&D services, solidify its role as a critical supplier to downstream industries such as construction, automotive, and packaging, both domestically and internationally.

Revenue Profitability And Efficiency

For FY 2024, the company reported robust revenue of CNY 237.1 billion, demonstrating its significant scale. Net income reached CNY 12.4 billion, translating to a net profit margin of approximately 5.2%. Strong operating cash flow of CNY 32.8 billion indicates healthy conversion of earnings into cash, supporting its capital-intensive operations and investments.

Earnings Power And Capital Efficiency

The company generated diluted EPS of CNY 0.72 for the period. Capital expenditures of CNY -10.4 billion reflect ongoing investments to maintain and upgrade its extensive production and energy assets. The substantial operating cash flow comfortably covers these investments, indicating solid fundamental earnings power.

Balance Sheet And Financial Health

The balance sheet shows a cash position of CNY 22.2 billion against total debt of CNY 55.1 billion. This results in a net debt position, which is manageable for a capital-intensive industrial firm. The company's financial health is supported by its strong operating cash generation, providing a buffer for its debt obligations.

Growth Trends And Dividend Policy

The company has demonstrated a commitment to returning capital to shareholders, declaring a dividend of CNY 0.217 per share. Future growth is intrinsically linked to global aluminum demand cycles, energy price fluctuations, and the company's ability to efficiently manage its integrated operations and cost base in a competitive market.

Valuation And Market Expectations

With a market capitalization of approximately CNY 134.2 billion, the market valuation reflects the company's position as a major industry player. A beta of 2.20 indicates the stock is highly sensitive to broader market movements and commodity cycle volatility, implying investor expectations of significant price swings.

Strategic Advantages And Outlook

Chalco's primary strategic advantages are its full vertical integration, state affiliation, and massive scale, which provide cost and supply chain benefits. The outlook remains tied to aluminum demand from key end markets like automotive and construction, as well as its success in managing energy costs and adhering to evolving environmental regulations in China.

Sources

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