Sun Hung Kai Information Research downgrades China Aluminum to "hold"

Hong Kong, May 10 news: The following views are extracted from the daily market summary published by Sun Hung Kai Information Research: Recommendation: Lower China Aluminum rating to “hold”. Aluminum Corporation of China China Aluminum placed 600 million new shares (representing 5.83% of the issued shares) and raised HK$4.25 billion at a price of HK$7.25 per share (a discount of 2.68% to the final closing price). We believe that China Aluminum's plan to issue A-shares will further dilute shareholders' equity, and a softer international alumina price will also affect Chinalco's earnings. The funds raised will be used for expansion, including the doubling of electrolytic aluminum smelting capacity. Reasons for promotion: Equity should be diluted again: Allotment will result in a 5.2% dilution in earnings per share. As the Group has been approved by shareholders to issue 1.5 billion A shares later, we expect the earnings per share to be further diluted by 11%. Product prices are still the key: prices of electrolytic aluminum on the London Metal Exchange rose by 17% in the past four weeks, but international alumina prices have fallen by 2% since the end of March. Since alumina contributes 94% of China Aluminum's operating profit, we believe that the continued softening of alumina prices will pressure the Group's earnings, offsetting the Group's profit margin and sales growth in the electrolytic aluminum business. Based on the above points of view, we have recently lowered the investment rating of Chinalco to "hold."