The Alumina Corporation of China (ACH) is a producer of alumina and primary aluminum in the People's Republic of China. The company is engaged in alumina refining and primary aluminum smelting operations. Its operating segments include alumina segment and primary aluminum segment. The alumina segment is engaged in the mining and purchasing of bauxite and other raw materials, refining bauxite into alumina, and selling alumina both internally to the company's primary aluminum smelters and externally to customers outside the company.
This segment also includes the production and sales of alumina hydrate, alumina chemicals and gallium. The primary aluminum segment is engaged in procuring alumina and other raw materials, supplemental materials, smelting alumina to produce primary aluminum. In addition, this segment includes production and sales of carbon products and small amount of aluminum fabricated products.
The firm is known as Chalco in China and is China's largest aluminum producer and the world's second largest. It is 8 percent owned by Alcoa (AA), the top global aluminum maker. Aluminum, of course, is a metal lighter than steel, resistant to corrosion and high in electrical conductivity. As a result, it is widely used in applications such as construction, power, packaging and autos.
The company's stock price currently looks attractive given that it trades at half of book value, half of sales and twelve times estimated earnings for 2007. The company is also strong fundamentally with exceptional sales growth, earnings growth, great return on equity and lots of free cash flow. The latest earnings announcement showed that 2006 net profit surged 67 percent to $1.52 billion on a 64 percent increase in revenue. In addition, the company's aluminum output soared 84 percent to1.93 million tons last year.
Technically the stock continues to trade above its 50 and 200-day moving average, indicating a long-term uptrend. The stock is an aggressive issue that can be volatile at times. No LEAPS are offered, but Chalco does have an options market that has enough open interest to make them tradable and they currently go out to August of 2007, allowing the strategist ample time to capture profits to the upside.
Figure 1: 50 and 200-Day Moving Average Chart for Aluminum Corporation of China Incorporated
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