Operating in a highly prosperous cycle while continuously delivering strong fundamentals, growth white-chip stock China Hongqiao (01378) has once again flexed its "muscles" to the capital market. Recently, China Hongqiao disclosed an interim report showing continued strong growth in core financial metrics. The report card shows that in the first half of this year, China Hongqiao achieved revenue of 81.039 billion yuan and net profit attributable to shareholders of 12.361 billion yuan, representing year-on-year increases of 10.1% and 35% respectively.
On the day of the interim report disclosure, China Hongqiao also officially announced the formal implementation of a new round of share buyback plan, with a total buyback amount of no less than 3 billion Hong Kong dollars. According to the company's statement, the buyback is based on Hongqiao's full confidence in the company's future business prospects and recognition of the company's long-term value.
It is worth noting that during the first half of this year, China Hongqiao has already spent 2.61 billion Hong Kong dollars to repurchase approximately 187 million shares. As one of the common methods for listed companies to manage market value, buybacks can release positive signals to the market and help boost investor confidence, representing a concrete manifestation of listed companies' emphasis on shareholder returns and responsibility to shareholders.
For China Hongqiao, whose stock price has accelerated upward in recent years and repeatedly broken historical highs, the company's active buyback "subtext" may be that Hongqiao's management remains bullish on the company's subsequent performance and stock price, suggesting that the company's growth potential is far from fully released.
**Interim Results Highly Delivered**
Reviewing the global commodity market situation in the first half of this year, "differentiation" became the keyword. However, under pressure testing, China's aluminum consumption overall maintained a steady performance, with demand continuing to grow in multiple sectors including new energy vehicles, renewable energy, and infrastructure construction. The photovoltaic industry, in particular, was stimulated by new policies, further releasing demand for aluminum.
In terms of specific industry volume and price performance, according to Antaike data, the average price of three-month aluminum on the London Metal Exchange in the first half was approximately $2,546 per ton (excluding tax), up 6% year-on-year; the average price of three-month aluminum on the Shanghai Futures Exchange was approximately 20,226 yuan per ton (including VAT), up about 1.9% year-on-year.
During the same period, global primary aluminum production was approximately 36.59 million tons, with a year-on-year increase of 1.8%; primary aluminum consumption was approximately 36.72 million tons, with a year-on-year increase of 3.1%. Specifically in the domestic market, primary aluminum production and consumption were 21.84 million tons and 22.97 million tons respectively, increasing by 2.4% and 4.3% year-on-year respectively.
Operating in the industry's "tailwind period," China Hongqiao seized opportunities and achieved growth "acceleration." During the reporting period, China Hongqiao's aluminum alloy product sales volume increased by 2.4% year-on-year to 2.906 million tons, with average prices rising 2.7% year-on-year to 17,853 yuan per ton (excluding VAT, same below); alumina product sales volume increased by 15.6% year-on-year to 6.368 million tons, with average selling prices rising 10.3% year-on-year to 3,243 yuan per ton; aluminum alloy processing product sales volume increased by 3.5% year-on-year to 392,000 tons, with average prices rising 2.9% year-on-year to 20,615 yuan per ton.
With aluminum products achieving "volume and price increases," declining electricity costs on the cost side further enhanced China Hongqiao's profits. Data shows that in the first half, the company's self-owned power generation cost in Shandong (including tax) was 0.33 yuan per kWh, down 31% year-on-year and 21% quarter-on-quarter.
According to SMM data statistics, the tax-inclusive electricity price for external power purchases in Shandong in the first half was 0.62 yuan per kWh, down 1.1% quarter-on-quarter; Yunnan's tax-inclusive electricity prices in the first and second quarters were 0.44 yuan per kWh and 0.42 yuan per kWh respectively, with Q2 down 4.5% quarter-on-quarter.
From the current time point, energy transformation remains one of the key competitive factors for aluminum companies. Since this year, China Hongqiao has accelerated the transfer of electrolytic aluminum capacity to Yunnan. In March, Hongqiao shut down the C series 241,000-ton capacity of the Binzhou Hongnuo 723,000-ton primary aluminum production line project, replacing and starting the Hongtai E series 121,470-ton and D series 119,060-ton capacity.
Subsequently, on July 1, the company permanently retired 448,000 tons of capacity, replacing and starting 69,750 tons of D series capacity at subsidiary Yunnan Hongtai and 160,700 tons of B series capacity at Yunnan Honghe.
**Multiple Highlights Converge to Open Upward Stock Price Space**
While interim results have been highly delivered, China Hongqiao's journey of continuously setting new historical highs in performance may be far from over.
For the industry, the logic of domestic electrolytic aluminum supply constraints continues to be effective. With limited new capacity additions, the continued prosperity of downstream industries such as power grids and new energy vehicles will strongly support demand-side resilience. The electrolytic aluminum supply-demand gap is expected to gradually emerge, thereby driving the aluminum price center upward.
Regarding alumina, the latest policy developments are also favorable for improving overcapacity conditions. On July 29, the China Nonferrous Metals Industry Association stated it "will strictly control new alumina capacity additions." In the medium to long term, as "anti-involution" policies continue to intensify, the pace of new alumina capacity commissioning is expected to slow, thereby supporting alumina prices.
For China Hongqiao itself, the company's internal growth logic is also strengthening in an orderly manner. In July, with Yunnan Hongqiao's 9 billion yuan investment to acquire a 25% stake in Yunnan Hongtai, Yunnan Hongqiao's total shareholding in Yunnan Hongtai rose to 100%, and China Hongqiao's direct shareholding ratio in Yunnan Hongtai also increased synchronously, which will increase China Hongqiao's electrolytic aluminum equity capacity by 457,000 tons.
Looking overseas, the Simandou project in which China Hongqiao participates is about to commence production, which will also play a positive role in enhancing the company's performance. It is understood that the Simandou iron ore mine is located in Guinea and is one of the world's largest and highest-quality undeveloped mines. The mine has proven standard resources of 4.41 billion tons, with an average total iron grade of TFe above 65%. The mine is expected to be completed by the end of this year and begin mining in early next year, with initial capacity to produce 120 million tons of high-quality iron ore annually.
Based on penetrating equity calculations, China Hongqiao holds a 21.675% interest in the northern block of the Simandou project. Once this project comes into production, it will further enhance the company's profits and open up future growth space.
With sufficient fundamentals for future growth, and returning to the capital market perspective, in addition to increasing buybacks, the expected A-share listing of China Hongqiao's core assets is also expected to help Hongqiao improve its valuation level.
Currently, the matter of China Hongqiao's holding company Hongchuang Holdings issuing shares to shareholders of Hongtuo Industrial to purchase 100% equity of the latter is still proceeding in an orderly manner. After this merger and acquisition matter is implemented, China Hongqiao's asset securitization level and market influence are expected to further improve.
Furthermore, given that A-share aluminum company valuations are generally higher than those in Hong Kong stocks, the A-share listing of Hongqiao's core assets is expected to bring synergistic valuation improvements to Hong Kong stocks, which will help China Hongqiao further open upward valuation space.
In summary, China Hongqiao's latest financial report has highly delivered on growth expectations. At the same time, it cannot be ignored that from the current time point, the company still plans to increase buybacks, which also releases a strong signal. Looking ahead, considering the intertwining of Hongqiao's internal and external positives, the sustainability of the company's current round of value rerating may very likely exceed market expectations.