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MarketScreener Homepage  >  Equities  >  Shanghai Stock Exchange  >  Shandong Nanshan Aluminium Co., Ltd.    600219   CNE000001139

SHANDONG NANSHAN ALUMINIUM CO., LTD.

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China aluminium makers to target auto, aerospace in global push

10/17/2016 | 03:01am EST
File picture of workers riding on an motor rickshaw through an aluminium ingots depot in Wuxi

MELBOURNE (Reuters) - China's giant aluminium makers are pushing into the global automotive and aerospace markets, with industry sources expecting their presence to heat up competition and possibly spark a buying spree for Western metals companies.

China's top aluminium companies are venturing into the more lucrative parts of the global value chain, on course to seize market share from the likes of Alcoa and Constellium, as they look to buy into foreign firms to boost their technical know-how and expand their reach.

The chief executive of Novelis Inc, the world's largest maker of rolled aluminium products, said last week he expected competition with Chinese producers to be "very fierce" over the next five to 10 years in the high-value-added sectors of aerospace and engineering - which so far have been dominated by European and U.S. manufacturers.

"Certainly (Chinese aluminium makers) will be able to produce high quality products as well," Steve Fisher told the Reuters Commodity Summit in Seoul.

Zhongwang USA LLC, backed by Chinese aluminium magnate Liu Zhongtian, said in late August it would buy high precision aluminium product maker Aleris Corp in a deal worth $2.3 billion, marking the biggest entry by a Chinese company into the U.S. aluminium industry.

The deal for Aleris, a supplier to the U.S. defence industry, has yet to be approved by U.S. regulators.

"If Aleris is acquired by the Chinese, it would be logical to think that there would be more competition within the higher value-added sectors such as aerospace and automotive. That's where the better margins are," said analyst Robin Bhar of Societe Generale in London.

"(But) Aleris is quite a significant supplier to the U.S. military, so it's by no means a done deal."

Shares of Amsterdam-headquartered aluminium product maker Constellium jumped after the announcement, reflecting bets that it could be next. Constellium did not immediately respond to an e-mailed request for comment.

"There will be more announcements of purchases by Chinese companies of foreign firms in the next 18 months and continued consolidation globally," said Charlie Durant of consultancy CRU in London.

"It will enable Chinese producers to better utilize their equipment in China, as well as obviously getting the access to markets around the world."

Alcoa is spinning out its precision manufacturing business into a company to be named Arconic, which industry sources said could be another potential target.

Arconic expects to grow its automotive sheet revenue around sixfold, to $1.3 billion in 2018 from $229 million in 2013. It has already signed $10 billion (8.22 billion pounds) with customers including Boeing and Airbus.

An Alcoa spokesperson declined to comment.

"Zhongwang have been openly pursuing a downstream focus for years, but they aren't the only ones with capital, a healthy balance sheet and an appetite to expand downstream," said Paul Adkins, managing director of Beijing-based consultancy AZ China.

Adkins pointed to China's Hongqaio Group and Shandong Nanshan Aluminium as potential bidders.

Hongqaio Group declined to comment. Nanshan's board secretary said the company hasn't received any information about possible mergers from the board.

Shandong Nanshan said in July it aims to tap growth in new energy vehicles to become a top automotive and a major aerospace materials supplier as it strives to meet international certification standards.

(Reporting by Melanie Burton; Additional reporting by Ruby Lian in SHANGHAI, Nick Carey in CHICAGO and Gus Trompiz in PARIS; Editing by Tom Hogue)

By Melanie Burton


© Reuters 2016
Stocks mentioned in the article
ChangeLast1st jan.
ACCESS CO., LTD. -0.40% 755 End-of-day quote.2.72%
LINE CORPORATION 0.00% 5350 End-of-day quote.0.00%
SHANDONG NANSHAN ALUMINIUM CO., LTD. -3.32% 3.49 End-of-day quote.10.44%
WORLD CO., LTD. 1.16% 1306 End-of-day quote.4.23%
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Financials
Sales 2020 21 269 M 3 283 M 3 283 M
Net income 2020 1 877 M 290 M 290 M
Net cash 2020 7 566 M 1 168 M 1 168 M
P/E ratio 2020 22,4x
Yield 2020 1,53%
Capitalization 41 707 M 6 424 M 6 439 M
EV / Sales 2020 1,61x
EV / Sales 2021 1,40x
Nbr of Employees 18 679
Free-Float 50,5%
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Mean consensus OUTPERFORM
Number of Analysts 5
Average target price 3,05 CNY
Last Close Price 3,49 CNY
Spread / Highest target 8,88%
Spread / Average Target -12,6%
Spread / Lowest Target -24,1%
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Managers and Directors
NameTitle
Zheng Feng Lü General Manager, Director & Deputy General Manager
Ren Ce Cheng Chairman
Yan Han Chief Financial Officer & Director
Jian Bo Song Director
Chun Lei Liu Director & Deputy General Manager
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