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Current low prices levels offset negative operating environment
- China Aluminium Network
- Post Time: 2008/10/15
- Click Amount: 494
Aluminium Corporation of China (Chalco) reported a significant decine in top-line 1H 08, primarily due to a decline in sales volume for aluminina and primary aluminium. This decline in sales volumes was coupled with a decline in external selling prices of alumina and primary aluminium. Furthermore, 1H 08 profitability declined due to increased costs. The recent accord, signed by Chialco and its peers will lead to production cuts in order to reduce energy consumption. This would have a negative impact on top-line in 2H 08 and if power problems in China are not resolved by the end of 2008, could extend into the next fiscal year. Going forward, we believe that the moderation in aluminium prices, along with the rising cost of electricity, power and transportation will affect profitability in the long term. However, the stock has declined sharply in recent trading sessions and we believe the poor results along with an announced production cut are already factored into at the current price and the stock in now undervalued at current levels. Therefore we expect significant upside potential in the common stock.
Source: Research Oracle
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