Shares of China Hongqiao, the world’s largest aluminium smelter, slumped as much as 6.9 per cent after it issued a statement denying allegations made by short-seller Emerson Analytics that it has inflated its profit. “The directors of the company are of the view that the allegations and information contained in the allegation report are biasedly-selected, materially misleading, untrue and unfounded,” Hongqiao said in a filing to Hong Kong’s bourse late on Monday. Its stock resumed trading today and fell as low as HK$6.6 at the market opening before closing 0.7 per cent lower at HK$7.1. It tumbled 8.3 per cent on March 1 when the report was published, before trading was halted. Short-seller Emerson alleged in a research report published a week ago that Hongqiao’s “real profitability” was at least 51 per cent below levels it reported for the nine years from 2007 to 2015, and should be worth only HK$3.1 a share. In the 46-page report, it claimed the Shandong province-based firm had under-reported its true cost of self-generated power by 11.7 billion yuan and received “subsidies” from an undisclosed related party to the tune of 1.8 billion yuan between 2010 and 2015. It also alleged that Hongqiao had received from related parties external subsidies for the supply of the raw material alumina amounting to 6.1 billion yuan between 2007 and 2015, and under-reported the production cost of self-produced alumina by 2 billion yuan between 2012 and 2015. Emerson said it had based its allegations on detailed calculations of estimated production costs using publicly available data on peers’ production costs, data provided by industry consultancies including Beijing-based Antaike, and unnamed current and ex-employees of Hongqiao. Emerson said it has supplied the data obtained from an unnamed industry consultancy, as well as audio recordings of interviews with staff and their names and contact details to Hong Kong’s Securities and Futures Commission. The commision declined to comment. Hongqiao said it is preparing a detailed clarification announcement to refute the allegations, which will be released “as soon as practicable.” Its board considers its shares to be under-valued by the market, and may launch a shares buy-back. China Hongqiao shares fall after reports of ‘dubious transactions’ It is the second time Hongqiao has been hit by negative research reports in just over three months. In late November, an anonymous online report posted on hongqiaoexposed.com accused it of failing to disclose the connected nature of various transactions and using them to inflate profit. Hongqiao put out a detailed announcement a month later refuting the report. Hongqiao is forecast to post later this month a 94.5 per cent jump in net profit for 2016 to 7.1 billion yuan, according to the average forecast of 13 analysts polled by Thomson Reuters. The firm in 2015 usurped Russian giant Rusal to become the world’s largest aluminium smelter after surpassing the output of state-backed Aluminum Corporation of China a year earlier. It achieved this through aggressive debt-funded capacity expansion, amid industry-wide overcapacity. It was given various orders last year by the environmental protection watchdog of Zhouping county in Binzhou city, where its facilities are located, to stop output at production lines with combined annual capacity of 3.61 million tonnes, or just over half its total capacity, the South China Morning Post reported last October. A spokesperson said at the time it has not make announcement on the orders since it believes it can meet all the government requirments to meet its environmental obligations by the end of last year, adding it has neither paid fines nor ceased production at the facilities in question.