China Zhongwang (01333.HK), which was badly hit by the U.S. anti-dumping and countervailing investigations on aluminium exports in the second half of last year, has started to come out of the woods with its excellent performance in the China market, Wen Wei Po reported on August 17.

China Zhongwang is the largest manufacturer and seller of aluminium extrusion products in China and Asia. It is the second largest in the world with a production capacity of 800,000 tonnes. As soon as the U.S. carried out anti-dumping and countervailing investigations in the second half of last year, the company shifted its focus from export to domestic sales. As evidenced by its interim results, China Zhongwang’s business grew rapidly in the second quarter, with revenue surging 87% from the first quarter to RMB2.78 billion. Revenue from the China market even soared 94%, driving profit attributable to shareholders up 50% to RMB247 million. This shows that the company is gradually coming out of the woods.

In light of the impact of the probe on China Zhongwang’s export business, the group headed back to the domestic market and has quickly taken a leading position. State-owned enterprises and centrally administered enterprises in transport, machinery and equipment and power equipment sectors are among the top five customers of the group.

As China Zhongwang develops high-end aluminium plates, deep-processed products and series 2, 4, 5 and 7 which are excluded from the list probed by the U.S., the group plans to increase the shares of the four series to raise its gross profit margin.

The group has formulated a long-term strategy to expand its aluminium deep-processing business and plans to tap the high value-added flat rolled aluminium market in Tianjin, Liaoning’s Panjin and Heilongjiang’s Daqing. The new production line is expected to be completed in 2014 and operate at a capacity of three million tonnes in 2018.

The global consumption of flat rolled aluminium products will likely increase from 16.5 million tonnes in 2010 to 28 million tonnes in 2020, and the figure for China is expected to be 10 million tonnes in 2015, accounting for nearly half of the world’s total. With RMB18.6 billion cash in hand, China Zhongwang has a gearing ratio of 44.7%, which is good enough to cope with expenses over the next two to three years. Based in Liaoyang, Liaoning, China Zhongwang had 75 aluminium extrusion production lines as at June this year with three world-class 125MN extrusion presses and an annual output capacity of 700,000 tonnes. The group plans to add 18 sets of presses with a tonnage of over 75MN each in the next two years to meet the needs of large engineering projects.

The quarterly growth of China Zhongwang hints at an uptrend through the second half of the year. The group will likely see a significant growth over the coming two to three years with expanded capacity. Investors are suggested to hold the stock for a medium term.