After seven consecutive months of gains, with its stock price soaring from HK$3.98 to HK$10.48—a surge of over 160%—CHALCO (02600) shows no signs of slowing down. On November 25, the company’s subsidiary, Yunnan Aluminum, announced plans to acquire a 28.7425% stake in Yunlu Yongxin, 27.3137% in Yunlu Runxin, and 30% in Yunlu Hongxin from Yunnan Metallurgy for a total consideration of RMB 2.267 billion, payable in two tranches. Post-acquisition, Yunnan Aluminum will hold 96.0766%, 97.4560%, and 100% stakes in the three targets, respectively.

The targets specialize in electrolytic aluminum and aluminum alloy production, with Yunlu Hongxin focusing solely on aluminum alloys. Their financial performance varies: Yunlu Yongxin reported steady 2024 net profit (excluding non-recurring items) of RMB 608 million, while Yunlu Runxin’s profit plunged 72.3% to RMB 104 million, and Yunlu Hongxin posted a minor loss of RMB 3 million.

Valuation discrepancies emerged, with Yunlu Yongxin and Yunlu Runxin priced using the income approach (RMB 5.308 billion and RMB 2.93 billion, respectively), resulting in a combined goodwill of RMB 1.099 billion—48.5% of the acquisition cost. Yunlu Yongxin’s low debt ratio (13.5%) and high ROE (21.64%) highlight its quality, whereas Yunlu Runxin’s ROE dipped to 6.74% amid profit declines.

The deal, structured in two payments (80% upfront, 20% post-registration), will bolster Yunnan Aluminum’s net assets by RMB 1.255 billion and goodwill by RMB 1.099 billion, contributing RMB 715 million to net profit (14.02% of 2024 earnings). As CHALCO holds 29.1% of Yunnan Aluminum, consolidated financials will reflect these gains, notably increasing goodwill from RMB 3.495 billion.

Beyond financials, the acquisition resolves intra-group competition, streamlining CHALCO’s focus on aluminum expansion. The company’s diversified portfolio—spanning alumina, electrolytic aluminum, and high-purity aluminum—reinforces its global leadership. Despite revenue growing modestly (1.57% YoY in Q1-Q3 2025), CHALCO’s profitability improved, with net margins rising 4.72 percentage points since 2022 to 6.16%.

CHALCO’s shareholder-friendly approach includes consistent dividends (RMB 9.2 billion since 2021, 21% payout ratio) and institutional backing, evidenced by CITIC Securities’ increased stake (11.04%) and rising港股通 holdings (28.99% as of November 26). Analysts like Goldman Sachs project robust 2025-26 recurring profits (RMB 13.3-14 billion), while Pacific Securities forecasts higher earnings (RMB 14.6-17.7 billion).

With strategic acquisitions, resolved competition, and strong fundamentals, CHALCO’s doubled market cap and 2.7% dividend yield may yet climb further on sustained growth and aluminum price tailwinds.