CHINAHONGQIAO (01378), a global leader in integrated aluminum production, has solidified its profitability through full-industry-chain advantages and economies of scale. High self-sufficiency rates in bauxite, power, and alumina ensure cost competitiveness per ton of aluminum. The firm forecasts net profits attributable to shareholders of RMB 24.8 billion, RMB 25.8 billion, and RMB 28.0 billion for 2025–2027, reflecting year-on-year growth of +10.9%, +4.1%, and +8.3%, respectively.

Based on a 2026 industry average P/E of 11x and factoring in the company’s high dividend yield, Huachuang Securities assigns a 12x P/E for 2026, deriving a target price of HK$34.3 and reiterating its "Recommend" rating. Aluminum price assumptions for 2025–2027 were revised upward to RMB 20,600/21,000/21,300 per ton, while alumina cost assumptions were lowered to RMB 3,200/2,750/2,750 per ton.

**Key Highlights:** 1. **Completed Share Placement to Optimize Capital Structure** On November 25, the company announced the completion of a share placement and subscription agreement. A total of 400 million new shares were issued at HK$29.20 per share to Hongqiao Holdings, raising approximately HK$11.49 billion net. Funds will be allocated as follows: - 60% (HK$6.89 billion) for domestic and international projects, including Yunnan’s renewable energy initiatives, capacity upgrades, lightweight materials, and the Simandou iron ore project. - 30% (HK$3.45 billion) for debt repayment to improve capital structure, addressing HK$54 billion in maturing debt by mid-2026. - 10% (HK$1.15 billion) for working capital, including coal and raw material procurement.

2. **Confidence Demonstrated by Insider Buying** On November 18, Hongqiao Holdings purchased 7.5 million shares at an average price of HK$30.5353, increasing its stake to 64.02%. Post-placement, its ownership dipped to 59.82% but rebounded to 61.44% after subscription. Controlling shareholders Zhang Bo, Zhang Hongxia, and Zhang Yanhong collectively hold 61.53%, signaling strong confidence in future growth.

3. **Q3 Earnings Beat Expectations** Subsidiary Shandong Hongqiao reported Q3 revenue of RMB 38.7 billion (+2% YoY, +2% QoQ) and net profit of RMB 6.9 billion (+18% YoY, +14% QoQ). The outperformance was driven by robust electrolytic aluminum margins, with industry profits reaching RMB 4,724/ton (+14% QoQ, +84% YoY). Contributions from Indonesia’s alumina and Guinea’s bauxite projects further lifted results.

4. **Aluminum Market Outlook** Q4 2025 aluminum prices averaged RMB 21,407/ton (+3.4% QoQ), supported by tight global supply (due to power constraints) and rising energy storage demand. Low LME and domestic inventories (1.2–1.3 million tons) and a high copper-aluminum ratio (above 4x) suggest potential for aluminum price rallies. CHINAHONGQIAO, with its top-tier capacity and consistent dividends, is well-positioned to benefit.

5. **Simandou Iron Ore Project Launch** The Simandou mine, with Phase 1 production of 30 million tons/year (full capacity: 60 million tons/year), began operations on November 11. CHINAHONGQIAO holds an indirect 21.36% stake in the northern block, which is expected to significantly boost future earnings. The first shipment departed on December 3.