Guotai Junan Securities International has reiterated its "Buy" rating on CHINAHONGQIAO (01378) and raised the target price to HK$40.9. The firm has increased its profit forecasts for 2025–2027 by 10.2%, 11.3%, and 12.6% to RMB25.003 billion, RMB25.378 billion, and RMB25.946 billion, respectively. The revised target price of HK$40.90 reflects a 14.0x P/E ratio for 2026, driven by: 1) upward adjustments in peer valuations and 2) sustained improvements in profitability amid favorable aluminum market conditions. The bank also views the recent stock price correction due to the rights issue as an attractive buying opportunity.

Key highlights from Guotai Junan Securities International’s analysis include:

**Strong Q3 2025 Performance Driven by Higher Aluminum Prices and Lower Power Costs** CHINAHONGQIAO’s core subsidiary, Shandong Hongqiao, reported unaudited financial results for Q3 2025. Revenue for the first nine months of 2025 rose 6.2% year-on-year to RMB116.9 billion, while net profit surged 23.1% to RMB19.4 billion. Gross margin expanded to 25.2%, up 1.0 percentage point year-on-year. The robust performance was attributed to rising aluminum prices, with the Q3 average price reaching approximately RMB20,700 per ton, up from RMB20,200 per ton in mid-2025. Additionally, the company benefited from lower electricity costs as it shifted more production capacity to Yunnan Province, where hydropower rates are lower during non-flood seasons. Management expects further capacity expansion in Yunnan by Q4 2025, targeting 2.16 million tons by year-end (a significant increase from ~1.74 million tons in mid-2025).

**Share Buybacks and High Dividends Reflect Management Confidence** Following a HK$2.6 billion share repurchase in H1 2025, CHINAHONGQIAO announced a new buyback program in August 2025, targeting at least HK$3.0 billion (subject to market conditions). Since September 22, 2025, the company has repurchased 3.54 million shares in the open market. Moreover, its dividend payout ratios over the past three years stood at 46.8%, 47.0%, and 63.4%, consistently exceeding 45% since 2020. These actions underscore management’s confidence in the company’s growth prospects and commitment to shareholder value.