On Thursday, Citi maintained a Buy rating on Aluminum Corp. of China, commonly known as Chalco (2600:HK) (NYSE: ACH), while raising its price target to HK$7.88 from the previous HK$5.51. The adjustment follows a review of the company's earnings forecasts after recent results and includes guidance from the company as well as updated price forecasts from Citi's commodity team.
The firm based the new price target on a price-to-book (PB) valuation method, expressing confidence in the aluminum market's outlook. The analyst cited several factors contributing to the positive stance, including strong demand from sectors such as solar installation and new energy vehicles (NEVs) in China, coupled with a tight supply situation.
Citi also anticipates that aluminum margins could remain elevated for an extended period within the Chinese market. This expectation is supported by the potential for a manufacturing restocking cycle that could commence in the year 2024, as outlined in the firm's outlook note.
The updated price target reflects a bullish perspective on Chalco's future, with Citi suggesting that the company is well-positioned to benefit from the current market dynamics. The firm's analysis points to robust demand and constrained supply as key drivers for sustained profitability in the aluminum sector, particularly in China.
InvestingPro Insights
Aluminum Corp. of China's (Chalco) financial health and market performance provide a deeper understanding of its potential investment value. With a price-to-earnings (P/E) ratio of 7.84, Chalco is trading at a valuation that could be attractive to investors looking for undervalued stocks, especially in a market that is anticipating growth in the aluminum sector. The company's PEG ratio of -0.23 and a price to book value of 0.75 further suggest that the stock may be undervalued relative to its growth potential and assets.
The company's revenue has grown by 6.38% over the last twelve months as of Q4 2023, showcasing a steady increase in sales. Despite a quarterly revenue decline of 4.15% in Q4 2023, Chalco's gross profit margin remains strong at 25.25%, indicating the company's ability to maintain profitability. Moreover, with an operating income margin of 10.3% and a return on assets of 6.12%, Chalco demonstrates financial discipline and efficient asset management.
For dividend-seeking investors, Chalco's dividend yield stands at an appealing 5.16%, complemented by a dividend growth of 9.85% over the same period. This highlights the company's commitment to returning value to its shareholders. Additionally, the InvestingPro platform offers further insights with PRONEWS24 to unlock a 10% discount on yearly or biyearly Pro and Pro+ subscriptions. There are 5 additional InvestingPro Tips available for Chalco, which can guide investors on leveraging these financial metrics for investment decisions.
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