Is Aluminum Corporation of China (SEHK:2600) Still Attractive After Its Recent Share Price Surge

• If you are wondering whether Aluminum Corporation of China at HK$13.37 is still good value after a strong run, this article walks through what the current price might be implying about the company.
• The stock has posted returns of 9.9% over the last 7 days, 24.1% over the last 30 days, 5.8% year to date, 208.1% over 1 year and 281.1% over 3 years, with a very large gain over 5 years of 452.0%.
• Recent interest in Aluminum Corporation of China has been closely watched by investors, who are paying attention to how the share price aligns with the underlying business and sector conditions. Market commentary has focused on whether these returns are fully reflected in fair value or if expectations have moved ahead of fundamentals.
• On our checks the company has a valuation score of 5 out of 6. Next we will look at what different valuation approaches say about that score, before finishing with a more complete way to think about what the stock could be worth.

Aluminum Corporation of China delivered 208.1% returns over the last year. See how this stacks up to the rest of the Metals and Mining industry.

Approach 1: Aluminum Corporation of China Discounted Cash Flow (DCF) Analysis

The DCF model estimates what a business could be worth by projecting its future cash flows and then discounting those back to today, so you can compare that value to the current share price.

For Aluminum Corporation of China, the latest twelve month free cash flow is CN¥25,738.70m. Analysts provide explicit forecasts out to 2027, with free cash flow for that year estimated at CN¥27,005m. Beyond that, Simply Wall St extrapolates cash flows out to 2035 using a 2 Stage Free Cash Flow to Equity model, which gradually tapers growth in later years.

Based on these projections, the model arrives at an estimated intrinsic value of HK$26.28 per share. Compared to the current share price of HK$13.37, this suggests the stock trades at about a 49.1% discount to the DCF estimate under this set of assumptions.

Result: UNDERVALUED on these assumptions

Our Discounted Cash Flow (DCF) analysis suggests Aluminum Corporation of China is undervalued by 49.1%. Track this in your watchlist or portfolio, or discover 881 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Aluminum Corporation of China.

Approach 2: Aluminum Corporation of China Price vs Earnings

For a profitable business, the P/E ratio is a useful way to think about what you are paying for each unit of earnings, because it links the share price directly to the company’s current profit generation.

In general, higher growth expectations and lower perceived risk can support a higher P/E ratio. In contrast, lower growth and higher risk usually line up with a lower, more cautious multiple. So the question is what a “normal” or “fair” P/E looks like for Aluminum Corporation of China today.

The stock is trading on a P/E of 14.49x. That sits below the Metals and Mining industry average P/E of 18.29x and also below the peer group average of 25.92x. Simply Wall St’s Fair Ratio for the company is 17.65x. This Fair Ratio is a proprietary estimate of what the P/E might reasonably be, given factors such as earnings growth, industry, profit margin, market cap and company specific risks.

Compared with simple peer or industry comparisons, the Fair Ratio is designed to be more tailored because it adjusts for those business characteristics. With the current P/E of 14.49x sitting below the Fair Ratio of 17.65x, the stock screens as trading below that fair multiple on this approach.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1446 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Aluminum Corporation of China Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company, linked to your assumptions about its future revenue, earnings, margins and fair value.

On Simply Wall St, Narratives live in the Community page and help you connect the story you believe to a financial forecast, and then to a fair value that you can compare with the current share price to decide if you are comfortable buying, holding or selling.

You do not need to build a complex model, because the platform helps you plug in your assumptions and then automatically updates your Narrative when new information, such as earnings releases or major news, is added.

For Aluminum Corporation of China, one investor might set a relatively high fair value because they expect stronger revenue and margin outcomes. Another might assign a lower fair value based on more cautious assumptions, and Narratives make those differences clear so you can see how your view lines up with others.

Do you think there's more to the story for Aluminum Corporation of China? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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