According to its 2008 annual report issued on February 20, 2009, the company realized business turnover of Rmb6.16bn (-12.04% yoy), net profit attributable to parent of Rmb69.789mn (-85.93% yoy), and EPS of Rmb0.07.

Main reason for its performance slump in 2008 is mainly as follows:

 

Aluminum price in 2H2008 suffered a substantial decline. According to our calculation, average price of domestic electrolytic aluminum is at ~Rmb16,900/ton, which is Rmb3,600 less than Rmb19,500/ton of the previous year, and the price was once even fell to an industry loss of ~Rmb10,000/ton 

 

Aluminum cost only decreased slightly when its sales price slumped.

 

The company drew part of inventories of Rmb84mn for devaluation preparation, more over, it had previewed the deterioration of macro-economy and its risk prevention is rather effective.

 

Our viewpoints and forecast to the aluminum industry and the company is as follows:

 

Wenshan alumyte development and up-stream resource control are focus of the company.

 

In-depth processing project under construction is another potential growth point of the company

 

Although its operation in 2009 will face great difficulty, as one of the domestic 14 main electrolytic aluminum enterprises, it will benefit from inventory or other support policies. 

 

Electrolytic aluminum industry is still at the bottom in short term, and its rebound is still awaited.    

We forecast that the company’s EPS in 2009-2010E at Rmb0.04 and Rmb0.32. Its present share price is Rmb7.21, and 2008 PB is at 1.75x. Although its valuation is comparatively low compared with its A-share market peers, its absolute valuation is rather high, and future share price rebound still needs stimulation of aluminum price hike. We hereby give rating of “Neutral” for the counter.