XinRen Aluminium

XinRen Aluminium: Could see some interests as Co. announced strong set of 3Q10 results, allevating fears that recent underperformance from bigger peers like Chaloco or market talk that Co. had window dressed its books prior to IPO...

Rev for 3Q was at Rmb1.6b, +34.7%YoY, attributed to higher selling prices and pick up in exports in grp’s smelting division, which accounted for 58.4% of grp’s total rev. Grp similarly saw further expansion in its downstream business, with its fabrication sales +25.3%YoY at Rmb151.8m….

Net profit however was muted at Rmb80.3m, mainly due to its recent expenses frm IPO. Minus IPO expenses, Net profit at Rmb95.3m, +25.2%YoY. Gross profit margins however decreased slightly to 11%, vs 12.7%YoY on the back of higher alumina costs. Result brings 9M10 Rev at Rmb4.2b, +75.1%YoY, and Net Profit at Rmb256.7m, +452%YoY….

We note that at current price, grp trades at undemanding valuations, at an annualized FY10E P/E of 7.2x, while Overseas listed Mid-Sized Chinese Listed smelters trades at 30x P/E. Going forward, Grp expects to benefit from increasing aluminum prices, backed by strong demand in China and has guidance for 4Q10 net profit to be even better than 3Q10….