| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 27.81 | -17 |
| Intrinsic value (DCF) | 29.59 | -12 |
| Graham-Dodd Method | 7.23 | -79 |
| Graham Formula | 43.85 | 30 |
Yunnan Aluminium Co., Ltd. stands as a prominent integrated aluminum producer in China's basic materials sector, with a comprehensive manufacturing footprint spanning from raw alumina to value-added aluminum products. Founded in 1970 and headquartered in Kunming, the company leverages its strategic location in Yunnan province, which offers competitive advantages in hydropower-based energy costs crucial for energy-intensive aluminum smelting. Yunnan Aluminium's diverse product portfolio includes cast aluminum alloy ingots, wrought aluminum products, aluminum foil, sheets, strips, and specialized items like aluminum welding wire and nose bridges for medical masks. These products serve critical end-markets including national defense, aerospace, rail transit, and electronics, positioning the company as a key supplier to China's industrial and infrastructure development. As China continues to prioritize advanced manufacturing and infrastructure investment, Yunnan Aluminium's integrated operations and focus on high-value aluminum applications make it a significant player in the country's industrial supply chain. The company's ESG considerations include energy efficiency through its hydropower advantage, though it faces challenges common to heavy industry regarding environmental compliance and carbon emissions management.
Yunnan Aluminium presents a compelling but cyclical investment case within China's aluminum sector. The company demonstrates strong operational performance with 2024 revenue of CNY 54.45 billion and net income of CNY 4.41 billion, translating to diluted EPS of CNY 1.27. Financial health appears robust with substantial cash reserves of CNY 6.28 billion against manageable total debt of CNY 2.38 billion, and strong operating cash flow generation of CNY 6.95 billion significantly exceeding capital expenditures. The dividend payout of CNY 0.41 per share provides income appeal. However, investors must consider the inherent cyclicality of aluminum prices, exposure to Chinese industrial demand fluctuations, and the sector's energy intensity amid evolving environmental regulations. The beta of 1.458 indicates higher volatility than the broader market. The investment thesis hinges on China's continued infrastructure and manufacturing investment, Yunnan's cost advantage from hydropower, and the company's ability to maintain profitability through commodity price cycles.
Yunnan Aluminium competes in China's fragmented but consolidating aluminum industry, where scale, energy costs, and product diversification determine competitive positioning. The company's primary competitive advantage stems from its location in Yunnan province, which provides access to low-cost hydropower—a critical factor given that electricity constitutes approximately 30-40% of aluminum smelting costs. This energy advantage positions Yunnan Aluminium favorably against competitors reliant on more expensive thermal power, particularly as China implements stricter carbon policies. The company's integrated operations from alumina to finished products provide cost control and margin stability across the value chain. However, Yunnan Aluminium faces scale disadvantages compared to industry giants like China Hongqiao and Chalco, which benefit from greater economies of scale and more diversified geographic footprints. The company's focus on value-added products for defense, aerospace, and electronics represents a strategic differentiation from commodity-focused producers, though it requires continuous technological investment to maintain quality standards. Competitive positioning is also influenced by transportation costs to key industrial regions in eastern China, where Yunnan's inland location may create logistical disadvantages compared to coastal producers. The company must balance investment in product sophistication against the capital intensity of maintaining competitive scale, particularly as environmental compliance costs rise industry-wide.