Action

Aluminum Corporation of China (Chalco) announced its 1Q26 results: Revenue rose 4.9% YoY and fell 9.5% QoQ to Rmb58.49bn. Net profit attributable to shareholders grew 56.2% YoY and 206.7% YoY to Rmb5.53bn. We upgrade our rating to OUTPERFORM, given rising aluminum prices and the firm's overseas expansion.

What’s changed?

Sales volume and prices of electrolytic aluminum rose in 1Q26; alumina product mix improved. In 1Q26, the firm's electrolytic aluminum output rose 3.61% YoY to 4.05mnt. Output of metallurgical-grade alumina and fine alumina fell 9.60% and rose 28.42% YoY to 4.05mnt and 1.22mnt. In 1Q26, the ASP of electrolytic aluminum rose 17.25% YoY and 11.43% QoQ to Rmb23,948/t, and that of alumina fell 30.71% YoY and 6.17% QoQ to Rmb2,696/t.

Asset structure improving; operating cash flow improves notably. In 1Q26, the firm's liability-to-asset ratio hit a record low of 43.27% (down 2.74ppt vs. 2025). Net cash from operating activities rose 73.84% YoY to Rmb10.88bn. ROE of net asset income rose 2.14ppt YoY to 7.11%.

Strengthening industrial advantages domestically; optimizing global value chain presence overseas. The firm has a fully integrated aluminum value chain in China and continues to strengthen its competitive edge by optimizing its upstream and downstream operations, enhancing mineral resource security, accelerating the transition to clean energy, and developing high value-added products. The firm further enhanced its resource security by acquiring Brazil’s Companhia Brasileira de Alumínio S.A., marking its first milestone in the overseas presence of its electrolytic aluminum value chain.

Geoeconomic tensions to drive up prices of electrolytic aluminum, alumina, and energy. As the US-Iran conflict disrupts aluminum supply and energy costs, we expect the firm's electrolytic aluminum, alumina, and coal businesses to benefit. However, we believe alumina demand may decline in the short term due to aluminum production cuts.

Financials and valuation

We keep our 2026 and 2027 earnings forecasts unchanged. Ashares are trading at 7.0x 2026e and 7.0x 2027e P/E, and Hshares are trading at 6.0x 2026e and 5.9x 2027e P/E. Considering that the conflict in the Middle East may drive up product prices, and the firm has started overseas expansion, we upgrade our ratings to OUTPERFORM for A- and H-shares. We maintain our A-share TP of Rmb15.39 (9.0x 2026e and 9.0x 2027e P/E with 29% upside). We maintain our H-share TP of HK$15.37 (8.0x 2026e and 7.9x 2027e P/E with 33% upside).

Risks

Sharp fluctuations in product prices; rising geoeconomic risks; disappointing demand.