中国铝行业报告-DeutscheBank-Chinaaluminiumindustryupdate

gAluminumResourcesMetals & MiningIndustry UpdateAsiaChinaIndustryAluminumDate1 August 2017Deutsche BankMarkets ResearchChina aluminium industry updateXinfa completed capacity shutdown of 530ktpa earlier this weekAluminium names performed quiet strong yesterday, thanks to the news of XinfaGroup completing the cuts of 530ktpa smelting capacity earlier this week andgovernment's comment against Chalco's Shanxi Huarun project, showing peoplethat government is indeed taking it seriously. According to Asian Metal, a groupof industry experts had paid a visit to its smelting plants and confirmed that Xinfahad successfully completed the closure of 426 potlines with 530kt capacity.Chalco needs to complete some formalities for its Shanxi Huarun projectMoEP commented on July 30 that Chalco Huarun’s project was approved byShanxi NDRC ahead of the confirmation of its capacity swap plan. Accordingto company management, the project's quota is from Liaoning Fushun plantsand Guangxi. They have the State Council's approval already but just need tocomplete the required formalities. Meanwhile, MoEP's comment on Chalco andother recent capacity closures indicate that government is indeed serious aboutsupply side reform, and both SOE and private companies are required to strictlyfollow the policies.Remain constructive on aluminium industry and ChalcoAluminum inventory in China local warehouses increased 2% WoW last week toalmost 1.3mt, partially due to sluggish construction demand during abnormal hotseason. We believe recent capacity shut down from Xinfa, Weiqiao, Easthope andJiarun to lower industry output and expect inventory to be lower in upcomingmonths, not to mention we have environmental shut down starting from middleNovember this year. With gradual executions happening, we remain positiveon Chinese government’s strong determination on supply side reform, andpotentially an environmental shutdown during heating season, as well as ourconstructive view on Chalco. We use 1.8x 2017E P/B – a premium over Chalco'slong-term historical average after factoring in improving ROE trajectory – as our12-month target forward P/B multiple. Risks for the aluminium sector and pricerelate to Chinese policy and execution.Sharon DingResearch Analyst+852-2203-5716James KanResearch Analyst+852-2203 6146Top picksChalco (2600.HK),HKD4.90BuySource: Deutsche BankCompanies featuredChalco (2600.HK),HKD4.90Buy2016A 2017E 2018EP/E (x)86.726.919.2EV/EBITDA (x)9.09.07.7Price/book (x)1.11.61.4Source: Deutsche BankDeutsche Bank AG/Hong KongDeutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should beaware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should considerthis report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONSARE LOCATED IN APPENDIX 1. MCI (P) 083/04/2017.Distributed on: 01/08/2017 01:57:06 GMT0bed7b6cf11c1 August 2017Metals