Aluminum Corp of China, Ltd (NYSE: ACH), or Chalco, is China's largest producer of primary aluminum (third largest in the world) and the world's second largest producer of alumina. For more than ten years, China's booming economy and growth have increased demand and consumption for this valuable metal. China is now the second-largest consumer of aluminum in the world.
A subsidiary of Aluminum Corp of China recently signed an agreement with a Vietnamese company, TKV, to build an alumina plant there with annual production capacity of 600,000 tons as Chalco seeks to strategically expand its operations. The total investment will amount to $460 million and is expected to be completed in two years.
China's largest aluminum producers recently agreed to cut production at least through September because of a power shortage. Feng Zhang, a Hong Kong-based analyst at JPMorgan Chase & Co., stated in a research report that the production cut "is very positive for aluminum prices and Chalco's share prices." Mr. Zhang also said "A production loss of this magnitude is likely to result in a significant rise in aluminum prices."
Aluminum Corp of China's revenues and net income have grown significantly the past few years reflecting the rapid growth of the Chinese economy. The Company reported revenues of $76.2 billion for the full year 2007, up 101.6% from $37.8 billion in 2005. Net income for the full year 2007 was $9.9 billion, an increase of 37.5% from $7.2 billion in 2005.
Aluminum Corp of China closed on July 30, 2008 at $26.34, down 71% from its fifty-two week high of $90.95. The stock now sells for less than 9 times trailing earnings. The aluminum industry is cyclical and it's usually a good time to buy when the industry is in a down cycle. The other factor affecting Aluminum Corp of China's lower stock price is the recent steep decline in the Chinese stock markets. China is growing at a torrid pace and its appetite and need for aluminum will only increase. Aluminum Corp of China is a world leader in its industry and should continue to lead in the future. Investing in Aluminum Corp of China is a way to invest in China's future economic growth and ongoing commodities boom.
References:
http://www.reuters.com/finance/stocks/keyDevelopments?symbol=ACH.N×tamp=20080716000000&rpc=66
Chalco Subsidiary Acquires New Alumina Deal in Vietnam News Release
http://www.bloomberg.com/apps/news?pid=20601087&sid=avBKrAfr01II&refer=home
Chalco Shares Rise on Output Cut Plan News Release
http://finance.google.com/finance?fstype=ii&q=NYSE:ACH
Company 2007 Annual Income Statement
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