| Valuation method | Value, HK$ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 23.10 | 67 |
| Intrinsic value (DCF) | 3.24 | -77 |
| Graham-Dodd Method | 3.70 | -73 |
| Graham Formula | 10.60 | -23 |
Aluminum Corporation of China Limited (Chalco) is China's leading integrated aluminum producer and a major global player in the basic materials sector. Headquartered in Beijing, Chalco operates across the entire aluminum value chain from bauxite mining and alumina refining to primary aluminum production and aluminum alloy manufacturing. The company's diversified business segments include alumina production, primary aluminum manufacturing, energy generation through thermal, wind, and solar power, and comprehensive trading operations. As one of China's largest state-owned aluminum enterprises, Chalco benefits from vertical integration, domestic market dominance, and strategic government support in the critical metals industry. The company serves both domestic Chinese markets and international clients, positioning itself as a key supplier in global aluminum supply chains. With operations spanning mining, energy generation, and metal production, Chalco plays a vital role in China's industrial infrastructure and the global basic materials landscape, particularly in serving construction, automotive, and manufacturing sectors worldwide.
Chalco presents a mixed investment case characterized by its scale advantages and market position offset by cyclical industry risks. The company's FY2024 performance shows solid revenue of HKD 237 billion and net income of HKD 12.4 billion, with positive operating cash flow of HKD 32.8 billion. However, the high beta of 2.197 indicates significant volatility relative to the market, reflecting sensitivity to aluminum price cycles and economic conditions. The company maintains reasonable leverage with total debt of HKD 55.1 billion against cash reserves of HKD 22.2 billion, while the dividend yield provides income appeal. Investors should consider Chalco's exposure to Chinese economic policies, global aluminum demand fluctuations, and energy cost pressures, particularly given the energy-intensive nature of aluminum production. The stock may appeal to investors seeking exposure to China's industrial growth and commodity cycles, but requires careful monitoring of global aluminum markets and Chinese regulatory developments.
Chalco's competitive positioning is defined by its scale, vertical integration, and strategic importance within China's state-owned enterprise framework. As one of China's largest aluminum producers, the company benefits from significant economies of scale across its mining, refining, and production operations. Its vertical integration strategy, encompassing bauxite mining, alumina refining, primary aluminum production, and even energy generation, provides cost advantages and supply chain security. The company's state-owned status offers access to favorable financing, regulatory support, and strategic resource allocation, particularly important in China's tightly regulated metals sector. However, Chalco faces intense competition from both domestic Chinese producers and global aluminum giants. The company's energy segment, which includes thermal, wind, and solar power generation, provides some insulation from energy price volatility—a critical factor given aluminum production's high energy intensity. While Chalco dominates the Chinese domestic market, its international competitiveness is challenged by lower-cost producers and more technologically advanced Western competitors. The company's trading segment enhances its market reach but exposes it to global price fluctuations. Environmental regulations and carbon emission requirements represent both challenges and opportunities, as Chalco's scale may allow more efficient compliance but also requires significant capital investment in cleaner technologies.