The 2017 interim results of the Company were lower than marketconsensus and our estimation. Total revenue of the Company decreased4.6% yoy to RMB 7,325 million, net profit attributable to shareholdersdecreased 8.0% yoy to RMB 1,260 million.
The star product, aluminum alloy formwork, will change the product mixof the Company and significantly lift its profitability. The aluminum alloyformwork has become the largest single product type, which has much higherprocessing fees than other aluminum products.
Revise down aluminum extrusion and flat-rolled product outputassumptions. The product mix restructuring will lead to less output.Revise up average processing fee assumptions due to positive productmix change. As the processing fee of aluminum alloy formwork is muchhigher than the other aluminum products and the output is significant, webelieve that the average process fees of the Company will be significantlylifted.Revise up TP to HK$ 5.60 and maintain “Buy”.