Soochow Securities issued a research report stating that China Hongqiao (01378) achieved operating revenue of RMB 87.506 billion in H1 2026, up 8.0% year-on-year; net profit attributable to shareholders was RMB 17.210 billion, up 39.2% year-on-year, in line with its earlier earnings forecast.

The bank maintained its "Buy" rating on China Hongqiao, optimistic that the company's full aluminum industry chain layout is advancing steadily, with coordination across upstream, midstream, and downstream driving performance improvement, and slightly raised its 2028 net profit attributable to shareholders forecast to RMB 34.80 billion (previously RMB 33.729 billion).

The main points from Soochow Securities are as follows: The upward shift in the aluminum price center drove the company's performance improvement, while the share of high value-added product business continued to rise. 1) Volume: In H1 2026, the company sold 2.811 million tons of aluminum alloy products; alumina sales were 6.917 million tons, up 8.6% year-on-year; aluminum alloy deep processing product sales were 444,000 tons, up 23.2% year-on-year, with the share of high value-added product business continuing to increase. 2) Price: In H1 2026, the average selling price of the company's aluminum alloy products was approximately RMB 21,192 per ton (excluding VAT), up about 18.7% year-on-year; the average selling price of aluminum alloy deep processing products was approximately RMB 23,436 per ton (excluding VAT), up about 13.4% year-on-year. 3) Gross margin: Benefiting from the upward shift in the aluminum price center, the gross margin of the company's aluminum alloy products rose to 38.5%, while the gross margin of aluminum alloy deep processing products was 32.7%.

The company continued share repurchases while major shareholders increased their holdings. In the first half of 2026, the company continued to advance shareholder return efforts, repurchasing a total of 159.3 million shares for a total consideration of approximately HKD 5.286 billion, with all repurchased shares cancelled; controlling shareholder China Hongqiao Holdings increased its holdings in the secondary market on June 8 and June 10 by a total of 41.5 million shares, with average transaction prices of HKD 26.4641 and HKD 26.3676, respectively, reflecting the major shareholder's firm confidence in the company's development prospects.

Layout in the Simandou iron ore project, with investment income expected to significantly enhance the company's profit. The Simandou iron ore project in which the company has invested and holds an equity stake achieved its first ore output in November 2025. Public data estimates show that the project's annualized capacity has now exceeded 40 million tons. As capacity gradually ramps up, it is expected to contribute new profit increments to the company and open a second medium- to long-term growth curve.

The global electrolytic aluminum supply-demand pattern in 2027-2028 may remain in tight balance, and the aluminum price center is expected to remain elevated. The bank estimates that overseas supply growth in 2027-2028 will be about 11.49%/7.91%, while global supply growth will be about 4.51%/3.31%; at the same time, considering the further recovery of global manufacturing, the bank estimates global demand growth of 1.99%/3.03%. The overall supply-demand pattern is shifting from a large shortage in 2026 to a tight balance. Considering the upward shift in the full cost center of electrolytic aluminum enterprises in Europe and the United States, as well as the rigid demand for overseas restocking, the bank believes aluminum prices have fundamentals for remaining elevated over the long term.

Risk warning: Downstream demand falling short of expectations, macroeconomic disruptions exceeding expectations, and the company's high dividend payout falling short of expectations.