HSBC Holdings PLC released a research report stating that CHINAHONGQIAO (01378) delivered strong performance in the first half of 2025, benefiting from rising demand and growth in both prices and sales volumes of alumina and aluminum. The bank expects that although year-over-year declines in alumina prices in the second half of 2025 may temporarily slow profit growth momentum, aluminum prices face upside risks supported by robust demand. The bank also noted that despite recent share price gains, the dividend yield remains attractive. HSBC maintains its "Buy" rating on CHINAHONGQIAO and raises its target price from HK$20.60 to HK$25.70.

HSBC noted that CHINAHONGQIAO achieved net profit of 12.4 billion yuan RMB in the first half of 2025, up 35% year-over-year, in line with previous earnings guidance. The strong profit performance was primarily attributed to: (1) rising alumina prices (up 10% year-over-year) and aluminum price increases (up 3% year-over-year); (2) benefiting from strong downstream demand and increased market share in aluminum processing products, with aluminum alloy, processed products, and alumina sales volumes rising approximately 2%, 3%, and 16% respectively.

HSBC added that although the company did not announce an interim dividend, guidance indicates that the full-year payout ratio will maintain the same 63% as last year, equivalent to approximately 8.5% dividend yield, which is an attractive level. Additionally, the company's board announced a new share buyback program with total repurchases of no less than HK$3 billion.

HSBC indicated that company management expects aluminum prices to remain firm in the second half of 2025, ranging between 20,600-21,300 yuan RMB per ton; alumina prices are expected to range between 3,200-3,300 yuan RMB per ton. Capital expenditure for 2025 is projected at 12-13 billion yuan RMB, flat compared to 2024. Furthermore, more capacity will be relocated to Yunnan in the second half of 2025, with Yunnan capacity expected to reach 2.2 million tons by year-end (total capacity approximately 6.5 million tons). The Simandou iron ore project is expected to deliver its first batch of ore in November this year.

Looking ahead, HSBC expects the company's second-half 2025 profit growth year-over-year to moderate, primarily due to the higher profit comparison base from record alumina prices in Q4 2024. Nevertheless, the company still has multiple positive factors, including: the 45 million ton capacity ceiling remains a key measure to maintain supply discipline; power grid investment, electric vehicle sales, and export recovery will continue to support demand; automotive trade-in subsidies continue to provide demand support.

The bank stated that against the backdrop of low inventory and strict capacity limits, aluminum prices face upside risks in the second half. Additionally, broader "anti-involution" policies may strengthen capacity limits in the aluminum industry, thereby helping maintain market discipline.