CITIC Maintains "Outperform" Rating for CHINAHONGQIAO (01378), Raises Target Price to HK$29.29 - Four Key Advantages Highlight Allocation Value

Stock News
Aug 18

CITIC has released a research report maintaining its earnings forecast for CHINAHONGQIAO (01378) at 24.44/25.12 billion yuan for 2025-2026. The current stock price corresponds to 2025/2026 P/E ratios of 8.3/8.0x respectively. Considering the valuation improvement driven by market risk appetite and the company's high dividend characteristics, the firm has raised its target price by 24% to HK$29.29, corresponding to 2025-2026 P/E ratios of 10.4/10.0x respectively, with an upside potential of 25%. The "Outperform" rating is maintained.

CITIC's main viewpoints are as follows:

**1H25 Results Meet Expectations** The company announced 1H25 results: operating revenue of 81.039 billion yuan, up 10.1% year-on-year; gross profit of 20.805 billion yuan, up 16.9% year-on-year; net profit attributable to shareholders of 12.361 billion yuan, up 35.0% year-on-year. The 1H25 financial performance met expectations.

**Rising Product Volume and Prices Drive Record Performance** The company's aluminum alloy sales volume reached 2.906 million tons, up 2.4% year-on-year, with aluminum alloy selling prices up 2.7% year-on-year to approximately 17,853 yuan/ton (excluding VAT). Alumina sales volume reached 6.368 million tons, up 15.6% year-on-year, with alumina selling prices up 10.3% year-on-year to 3,243 yuan/ton. In terms of profit per ton, aluminum alloy gross profit per ton was 4,505 yuan, up 5.3% year-on-year, while alumina gross profit per ton was 934 yuan, up 24.8% year-on-year.

**Continued Large-Scale Buyback Program Demonstrates Confidence** According to announcements, from January 15 to May 12, 2025, the company cumulatively repurchased HK$2.6 billion worth of shares, totaling 187 million ordinary shares, all of which were canceled, representing 1.98% of total share capital at the end of 2024. Based on firm confidence in future prospects and long-term investment value, the company plans to continue share buybacks with a total planned repurchase amount of no less than HK$3 billion.

**Leading Aluminum Company with Integrated Upstream and Downstream Green Industrial Chain** From the upstream perspective, the company has developed a bauxite supply base with an annual capacity of approximately 60 million tons in Guinea, effectively ensuring the company's raw material cost advantages. On the alumina side, after completing domestic capacity relocation and upgrades this year, total capacity reached 21 million tons/year, up 8% year-on-year.

From the midstream perspective, the company's total electrolytic aluminum capacity is 6.46 million tons/year, and it is implementing a "Northern Aluminum Moving South" plan, relocating some Shandong capacity to Yunnan. As of the end of 2024, the company had relocated annual capacity of 1.49 million tons, with plans to continue relocating 450,000 tons in 2025 and 1.07 million tons in 2026-2027. Additionally, on July 23, the company repurchased a 25% minority shareholding in Yunnan Hongtai, potentially increasing the company's electrolytic aluminum equity capacity by 6%.

From the downstream perspective, the company continues to expand its automotive lightweighting business, building a green recycling industrial matrix.

**Four Key Advantages Highlight CHINAHONGQIAO's Allocation Value** First, high profit and valuation elasticity, with capacity-to-market cap ratio ranking at the forefront among comparable electrolytic aluminum companies, positioned to benefit from future aluminum price increases. Second, high resource self-sufficiency capability with strong risk resistance, as the company's bauxite and alumina self-sufficiency rates both exceed 100%. Third, high dividend yield, with the company's current dividend yield at 7.8%, offering high allocation attractiveness. Fourth, the company is simultaneously advancing green aluminum industrial chain construction through both primary and recycled aluminum routes, potentially enjoying higher product premiums in the future.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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