Standard Chartered: Chinalco's earnings outlook deteriorated and relegated to the market

On August 2nd, Standard Chartered Securities lowered the rating of Chinalco (“6.93, 0.05, 0.73%, real-time market”) from “outperform” to “synchronized with the market”, and the reasonable valuation was lowered by 9.07 yuan. To 6.1 yuan.

According to a comprehensive foreign news report, Chinalco <02600.HK> invested US$1.35 billion in 44.65% of the Ximangdu iron ore project in West Africa. Standard Chartered believes that the iron ore business is very beneficial to Chinalco in the long run, but there are implementation risks in world-class projects and it is estimated that Cash flow can be generated for at least five years. At the same time, because Chinalco's debt is already too high, the bank questioned whether the project would be too large and believed that the parent company should retain the equity.

As aluminum prices continue to fall and costs rise, Chinalco's short-term earnings outlook has deteriorated significantly. The rating has been reduced from “outperform” to “synchronized with the market” and the reasonable valuation has been lowered from 9.07 yuan to 6.1 yuan.

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