Aluminium stocks industry is getting better

"As the domestic alumina prices continue to fall, the prospects of electrolytic aluminum industry will continue to improve. For the relevant stocks on the A-share market, investors should focus on." Yesterday, Zhou Yinyu, analyst at Galaxy Securities said.

Newer statistics show that in the first half of the year, the national output of electrolytic aluminum was 4.3 million tons, a year-on-year increase of 18.1%; the aluminum industry above the designated size (352 companies) had a 60.6% increase in main business revenue, a 69.4% increase in taxes, and a 1.48-fold increase in profits. According to Zhou Cunyu, due to the continuous decline in alumina ex-factory prices, the increase in electrolytic aluminum prices has exceeded the increase in production costs. The electrolytic aluminum industry's gross profit margin has generally been improved, and its profitability has been greatly improved. As a result, although output grew by only 18.1% year-on-year, the industry's profits have increased by 148%. The seven major electrolytic aluminum listed companies did not have a high growth in their main business income in the first half of 2006, with a higher rate of increase of 33.1% for G-packaged aluminum, and G-Guan Aluminum even had a 21.73% year-on-year decrease. However, the profit growth of the main business of the seven companies exceeded the main revenue, indicating that the gross profit margin has indeed been improved.

The average return on net assets of the seven companies increased significantly by 147.73% year-on-year, of which Jiaozuo Wanfang and G Bao Aluminium had higher ROE, both exceeding 12%, and the year-on-year increase was also significant; 7 companies’ The gross margin for sales increased by an average of 28.16%, of which Jiaozuo Wanfang had a relatively large increase, increasing from 4.14% in the same period of last year to 14.49%, an increase of 250%. “Aluminium listed companies have not refinanced since 2004. All the capital required for fixed assets investment comes from bank loans, resulting in a high debt-to-equity ratio and a drop in debt repayment ability.” Zhou Cunyu said that electrolytic aluminum industry performance in the first half of this year The increase will benefit from the rise in aluminum prices. The increase in performance in the second half of the year will come from the drop in alumina prices. Since the domestic alumina prices fell sharply after June, Chinalco also lowered its alumina prices twice in January. It is expected that with the successive production of new alumina production capacity at home and abroad, alumina prices will continue to fall.

Zhou Cunyu expects that the price of electrolytic aluminum may decline slightly in the later period due to the drop in the cost of alumina. However, the trend of maintaining or expanding the price difference between electrolytic aluminum and alumina before 2007 will not change, and the aluminum industry will continue to rebound. It is recommended that investors focus on electrolytic aluminum stocks such as Jiaozuo Wanfang and Lanzhou Aluminum.

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