First Shanghai has issued a research report assigning China Hongqiao (01378) a "Buy" rating, forecasting the company's revenue for 2025-2027 at RMB156.0 billion, RMB161.1 billion, and RMB167.4 billion respectively. Net profit attributable to shareholders is projected at RMB24.5 billion, RMB25.0 billion, and RMB25.8 billion for the same periods. The firm applies a 10x PE valuation for 2026, setting a target price of HK$29.0, representing 24% upside potential from current levels. First Shanghai's key viewpoints are as follows:

Significant Profit Growth in First Half In the first half of 2025, the company achieved operating revenue of RMB81.039 billion, up 10.1% year-on-year. Gross profit reached RMB20.805 billion, surging 16.9% year-on-year, with gross margin improving 1.5 percentage points to 25.7%. Net profit attributable to shareholders was RMB12.361 billion, representing robust growth of 35.0% year-on-year, while net margin increased 3.1 percentage points to 16.7%. The strong profit growth stems from revenue enhancement, gross margin expansion, and strict expense management, with basic earnings per share jumping 36.0% to RMB1.31.

Integration Demonstrates Cost Advantages The company maintains stable upstream bauxite supply, with 75.3% sourced from Guinea, securing raw material cost advantages. In the midstream, electrolytic aluminum sales volume reached 2.906 million tons, with gross margin improving 0.6 percentage points to 25.2%, benefiting from energy structure optimization, low-carbon technology reducing energy consumption, and digital empowerment. Downstream, aluminum alloy processing sales volume was 392,000 tons, with revenue growing 6.5% to RMB8.074 billion, achieving batch delivery of high value-added products. Full-chain synergy significantly enhances efficiency and cost control capabilities.

Global Supply-Demand Balance Tight, Aluminum Prices More Likely to Rise Than Fall In the first half of 2025, the global electrolytic aluminum market showed tight supply-demand balance. China's primary aluminum production accounts for approximately 59.7% of global output, while primary aluminum consumption represents about 62.6% of global consumption, up 0.2% and 1.1% respectively compared to the first half of 2024. Power grid, photovoltaic, and new energy vehicle sectors showed varying degrees of growth, contributing significantly to domestic demand. The second half is expected to see electrolytic aluminum prices maintained at RMB20,600-21,300 per ton, with alumina staying in the RMB3,200-3,300 range. Supply-demand dynamics determine aluminum prices' overall trend of being more likely to rise than fall.

Over RMB3 Billion Share Buyback The company highly values shareholder returns, spending HK$2.61 billion in the first half to repurchase and cancel 187 million shares, directly enhancing earnings per share. The company commits to maintaining 2024 dividend payout ratio levels in 2025 and announces the launch of a new share buyback program worth no less than HK$3 billion, forming a "continuous dividends + active market cap management" combination that fully demonstrates management's firm confidence in the company's future development.