Chutinush Taksinapinunt of HCM has upgraded Alcoa Inc to a strong buy with 2012 price target of $23.00.

Alcoa Inc. (Alcoa) is engaged in the production and management of aluminum, fabricated aluminum, and alumina combined, through its participation in technology, mining, refining, smelting, fabricating, and recycling. During the year ended December 31, 2010, aluminum and alumina represent more than 80% of Alcoa’s revenues.

Nonaluminum products include precision castings and aerospace and industrial fasteners. Alcoa’s products are used globally in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and industrial applications.

Alcoa is a global company operating in 31 countries. In addition, Alcoa has investments and operating activities in Australia, Brazil, the People’s Republic of China, Guinea, Iceland, Russia, and Saudi Arabia. Alcoa’s operations consist of four worldwide reportable segments: Alumina, Primary Metals, Flat-Rolled Products, and Engineered Products and Solutions. During 2010, the Company completed the acquisition of Three Rivers Aluminum Company doing business as Traco. In July 2010, the Company completed the sale of its Transportation Products Europe business.

Alumina

This segment consists of Alcoa’s global alumina system, including the mining of bauxite, which is refined into alumina. Alumina is sold directly to internal and external smelter customers globally or is sold to customers who process it into industrial chemical products. A portion of this segment’s third-party sales are completed through the use of agents, alumina traders, and distributors. During the year ended December 31, 2010, slightly more than half of Alcoa’s alumina production is sold under supply contracts to third parties globally, while the remainder is used internally. In 2010, Alcoa consumed 38.3 million metric tons of bauxite from Alcoa World Alumina and Chemicals (AWAC) and its own resources, 6.8 million metric tons from related third parties and 1.7 million metric tons from unrelated third parties.

Primary Metals

This segment consists of Alcoa’s worldwide smelter system. Primary Metals receives alumina, from the Alumina segment, and produces aluminum used by Alcoa’s fabricating businesses, as well as sold to external customers, aluminum traders, and commodity markets. The sale of aluminum powder, scrap, and excess power are also included in this segment, as well as the results of aluminum derivative contracts and buy/resell activity. Primary aluminum produced by Alcoa and used internally is transferred to other segments. The sale of primary aluminum represents more than 90% of this segment’s third-party sales. As of December 31, 2010, Alcoa had 878 kilo-metric tons of idle capacity on a base capacity of 4,518 kilo-metric tons.

Flat-Rolled Products

This segment’s business is the production and sale of aluminum plate and sheet. This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used to produce aluminum beverage cans. This segment also includes sheet and plate used in the aerospace, commercial transportation, building and construction, and distribution markets, which is sold to customers and through distributors. During 2010, approximately one-half of the third-party sales in this segment consist of RCS.

Engineered Products and Solutions

This segment includes titanium, aluminum, and super alloy investment castings; forgings and fasteners; aluminum wheels; integrated aluminum structural systems; and architectural extrusions used in the aerospace, automotive, building and construction, commercial transportation, and power generation markets. These products are sold to customers and through distributors. In addition, hard alloy extrusions products, which are also sold to customers and through distributors, serve the distribution, aerospace, automotive, and commercial transportation markets. Traco is a manufacturer of windows and doors for the commercial building and construction market.