Analysis of Performance Impact and Exchange Rate Risk of Chinalco International's 14.0 Billion RMB Overseas Contract

Based on public information inquiry and brokerage API data, the following is an assessment of Chinalco International’s (601068.SH) approximately 14.0 billion RMB overseas Engineering, Procurement, and Construction (EPC) contract signed on December 26, 2025, and an analysis of profit stability under the exchange rate mechanism.

• Contract amount: Approximately 14.0 billion RMB
• Currency and settlement method: USD settlement (floating exchange rate)
• Performance period: Approximately 5 years
• Company reminder: There are uncertainties in contract execution and revenue recognition; it is not expected to have a significant impact on 2026 revenue [1]

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: The 14.0 billion RMB contract amount is a medium-to-large order for Chinalco International, but its annual contribution over the 5-year execution period is approximately 2.8 billion RMB (if推进均匀ly). The increase in overall revenue needs to be judged based on the company’s existing scale and order reserves. Since the company’s recent revenue and order scale were not obtained (API did not return valid financial data), only qualitative analysis can be conducted from the order attributes and industry practices:

• EPC projects usually adopt milestone settlement, and the revenue recognition rhythm is highly related to project progress;
• Upfront investment, equipment/material procurement, and design stages account for a relatively high proportion, and profit margins are usually concentrated in the mid-to-late stages;
• If the project is delivered and settled in phases, the early-stage revenue contribution may be low, gradually increasing in the mid-term as the project progresses, and the final payment and quality deposit may be recognized delayed.

:

• The proportion of revenue in the project initiation, design, and upfront preparation stages is usually low;
• Cross-border projects have preconditions such as approval, compliance, and supply chain, and the actual execution cycle may lag behind the signing time;
• The settlement nodes of overseas EPC contracts are often closely linked to on-site construction progress, and revenue recognition is limited before construction is fully underway.

: Large overseas EPC projects usually have a wide range of gross margins, depending on project structure, proportion of equipment procurement, local costs, exchange rate structure, etc.:

• The design and construction links are highly competitive with relatively thin gross margins;
• If the proportion of equipment and material supply is high, there is more room for gross margin;
• Overseas projects are also affected by comprehensive costs such as tariffs, logistics, and local employment.

:

• Cost overruns and project delays are common risks in overseas EPC, which may erode profits;
• Exchange rate fluctuations and changes in inflation environment may lead to increased cost-side pressure;
• Whether the contract includes price adjustment mechanisms and exchange rate hedging clauses is crucial for profit protection (the company has reminded of existing uncertainties).

:

• EPC projects often require contractors to advance upfront funds (equipment procurement, construction preparation), and project early-stage cash flow may be negative;
• The payment collection rhythm is closely related to milestone settlement, payment terms, and customer credit;
• Overseas project payment collection may be superimposed with cross-border payment and compliance processes, and the time is uncertain.

needs to be judged based on the company’s existing order structure and financing capacity. If the company has many existing projects and some are in the early investment stage, superimposed with overseas project advance payment pressure, it may test working capital in the short term.

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• As of 2025, the RMB has appreciated by approximately 3.4% against the USD; onshore/offshore RMB both broke through the 7.0 threshold in December 2025, then fluctuated around this threshold [2];
• The Federal Reserve has cut interest rates three times in 2025, and market expectations for further rate cuts in 2026 remain (some institutions predict the terminal rate may drop to the range of 3.00%—3.25%) [3];
• Central parity management and stabilization operations by major banks in the spot market have made the RMB show a pattern of “slow and controllable appreciation”, and the risk of short-term sharp one-way fluctuations has been somewhat suppressed [2].

: Against the backdrop of RMB appreciation, USD revenue converted into RMB will generate exchange losses, directly reducing RMB-denominated revenue and profits.

• Revenue Side
  : The USD settlement amount is converted into RMB at the spot or agreed exchange rate at the end of the period/settlement date; the more the RMB appreciates, the lower the converted RMB revenue;
• Cost Side
  : If project procurement is denominated in USD or local currency, and RMB foreign exchange purchase is used to pay for cost-side expenses, the impact of exchange rate changes on profits is relatively partially hedged;
• Capital Side
  : Currency mismatch between contract advance payments and progress payment collections, and dependence on foreign currency financing, will increase the uncertainty of exchange gains and losses;
• Statement Side
  : Foreign currency assets/liabilities generated during contract performance need to be revalued at the end-of-period exchange rate on the balance sheet date, and exchange gains and losses are included in current period损益 (if the enterprise chooses hedge accounting, corresponding hedging and deferral treatments can be carried out).

• Without Effective Hedging
  : Sustained RMB appreciation will directly erode the project’s RMB-denominated profit margin; engineering enterprises themselves have not high gross margins (public data shows that the average profit margin of the manufacturing industry is only about 4.6%, although not fully comparable, it indicates that the impact of exchange rate fluctuations cannot be underestimated) [2];
• If the company uses tools such as forwards, options, or currency swaps
  : It can partially lock in the foreign exchange conversion cost of future USD revenue and improve profit predictability;
• Contract terms on exchange rate risk
  : Whether to share exchange rate fluctuations with customers and whether to use exchange rate adjustment formulas will significantly affect actual profits and losses;
• Macro policies and market sentiment
  : Will also push up/depress the RMB exchange rate periodically, need to pay attention to the smoothing effect of central parity guidance and major banks’ trading behavior on the spot exchange rate [2].

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:

• Large overseas EPC contracts help enhance the company’s brand and experience accumulation in the international market;
• The 5-year project cycle can provide continuous business support for the next few years;
• If the company has mature overseas project execution and risk control experience, it can reduce execution risks.

:

• Significant Exchange Rate Risk
  : Under USD settlement and floating exchange rate conditions, the RMB appreciation/depreciation trend will directly affect RMB statement profits;
• Execution Uncertainty
  : The company has reminded of existing uncertainties in contract execution, need to pay attention to subsequent project progress announcements;
• Cash Flow Pressure
  : Overseas EPC upfront advance funds are relatively large, if fund arrangement is improper, it may affect liquidity;
• Cost Control
  : Changes in raw material and logistics costs, tariffs and local compliance costs, and supply chain disruption risks need continuous tracking.

:

• Whether to disclose exchange rate hedging strategies and tool types (forwards/options/swaps, etc.);
• Whether to agree on exchange rate risk sharing mechanisms and price adjustment formulas;
• Disclosure of project progress and actual contribution of revenue/profit in subsequent regular reports;
• The company’s historical execution and payment collection records on overseas projects.

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• Performance Contribution
  : The 14.0 billion RMB overseas EPC contract is expected to provide continuous revenue and profit contributions in the next 5 years, but the execution rhythm may show the characteristics of “limited early-stage revenue contribution, gradual release in the mid-term as the project progresses, and delayed recognition of final payments”. The pull on revenue and profit in the short term (e.g., 2026) may be limited;
• Exchange Rate Risk
  : USD settlement and floating exchange rate mechanism expose project profit stability to direct impact from the RMB exchange rate; under the current environment, the RMB is appreciating slowly, and USD revenue converted into RMB will generate exchange losses, thus eroding profits;
• Profit Stability
  : Needs to be comprehensively assessed based on whether the company has adopted effective exchange rate hedging measures, whether the contract includes exchange rate adjustment clauses, and the company’s past execution and risk control capabilities on overseas projects. If the hedging strategy is sound and execution is smooth, it can smooth the impact of exchange rate fluctuations on profits to a certain extent; if hedging is insufficient, profits will be under pressure during the RMB appreciation cycle.

For further quantitative assessment, it is recommended to obtain the company’s recent financial statements, existing order structure, overseas business proportion, and specific policies for exchange rate risk management before conducting calculations.

[0] Jinling API Data (Note: Relevant company financial and market data were not successfully obtained in this analysis)
[1] Securities Times Official Website - China Capital Market Information Disclosure Platform, Chinalco International’s announcement on signing a contract for an overseas project, around December 30, 2025
[2] Yahoo Finance HK, “RMB Appreciation Rhythm Becomes a Stabilizer in Turbulent Environment: Stabilizing Foreign Trade, Suppressing Speculation, and Promoting Settlement Kill Three Birds with One Stone” (Bloomberg), 2025 (excerpt)
[3] Yahoo Finance HK, “USD Deposit Rates Decline, RMB Appreciates: Even 3% High Interest Makes It Hard to Earn Exchange Differences!”, 2025 (excerpt, including Fed rate cuts and interest rate outlook)