UBS: Maintains "Buy" rating on Aluminum Corporation Of China (02600) H-shares and HK$12.8 target price; third-quarter earnings slightly beat expectations.

UBS issued a research report maintaining its "Buy" rating on Aluminum Corporation Of China (02600) H-shares and a target price of HK$12.8. The company's third-quarter results were broadly in line with expectations, with net profit of RMB6.044 billion (same unit below), down 5% quarter-on-quarter and up 59% year-on-year, 3% above the bank's expectation of RMB5.885 billion. Earnings for the first nine months of the year represented 78% and 81% of the bank's and the market's full-year forecasts, respectively. The bank noted that the company's aluminum sales volume remained stable at 2.08 million tonnes, up 2% year-on-year. The industry cash spread narrowed by RMB600/tonne quarter-on-quarter but remained RMB3,200/tonne higher than the same period last year. Margins in the Yunnan region remained stable despite softer aluminum prices, as lower electricity prices during the rainy season largely offset price pressure, with third-quarter margins broadly flat versus the first half. In alumina, the company's output remained at a low level of 5.04 million tonnes, down 10% year-on-year. Industry margins continued to come under pressure, mainly because rising freight costs supported bauxite costs, while alumina prices fell by about RMB20 quarter-on-quarter, leaving smelters near break-even. The bank expects investors to react positively to the company's results, believing that the company has once again delivered solid quarterly results, further confirming sustained and stable earnings delivery in the first nine months of the year.