HTSC has reiterated its "Buy" rating on CHINAHONGQIAO (01378), maintaining its 2025-27 net profit forecasts at RMB25.63 billion, RMB25.43 billion, and RMB25.76 billion, respectively. The brokerage assigns a 12X P/E multiple for 2025, deriving a target price of HK$35.22 (based on a USD/HKD exchange rate of 0.92 as of November 8), citing the company's industry leadership, integrated operations, and commitment to shareholder returns through high dividends and share repurchases.
Key highlights from HTSC's analysis: 1. **Corporate Strategy Meeting**: At HTSC's 2025 Strategy Conference on November 5, CHINAHONGQIAO highlighted its operational performance and the ongoing supply-demand tightness in the aluminum sector, expressing long-term optimism about aluminum prices and profitability.
2. **Production Capacity**: As disclosed in a July 2025 regulatory filing, the company currently operates 19 million tons of annual alumina capacity and 6.46 million tons of aluminum smelting capacity in China. Its vertically integrated structure helps mitigate the impact of declining alumina prices.
3. **Overseas Expansion**: Through its stake in Guinea's "Winning Consortium" (SMB) and control of Indonesian alumina assets, CHINAHONGQIAO is advancing the Simandou iron ore project (VCS), expected to commence production by end-2025. Its Indonesian subsidiary, WHW, operates 2 million tons of alumina capacity.
4. **Shareholder Returns**: Following a HK$2.6 billion share buyback (187 million shares) in H1, the company announced plans for additional repurchases of at least HK$3 billion on August 15. Dividend payouts have remained robust at 46.8%, 47.0%, and 63.4% over the past three years, consistently exceeding 45% since 2020.
5. **Industry Outlook**: With rigid supply constraints in China's aluminum sector and strong demand from automotive/power grid sectors, HTSC anticipates further tightening of global aluminum supply-demand dynamics by 2026. While alumina prices remain at cyclical lows, CHINAHONGQIAO's smelting segment profits are expected to offset alumina margin pressures, benefiting from potential aluminum price increases.