HAITONG INT'L: The rise in alumina prices increases profit, maintaining a "outperform" rating on CHINAHONGQIAO (01378)

HAITONG INT'L has released a research report, maintaining a "outperform" rating for CHINAHONGQIAO (01378) with a target price of HK$18.96. Previously, CHINAHONGQIAO disclosed the performance of its subsidiary Shandong Hongqiao New Materials Co., Ltd for the first three quarters of 2024: Shandong Hongqiao achieved operating income of 110.7 billion yuan, a year-on-year increase of 12.5%, and net profit of 15.75 billion yuan, a year-on-year increase of 141.4%. Key points from HAITONG INT'L include: - The price of alumina products has risen, increasing the company's profits. Due to events such as a shortage of natural gas supply in Australia, shipping disruptions caused by hurricanes in Jamaica, and spills from red mud reservoirs at alumina plants in India, alumina prices have risen overseas, leading to a corresponding increase in domestic prices. According to data from Antaike, the average ex-factory price of alumina in Shandong in Q3 2024 was 3,920 yuan per ton, an increase of 37.3% year-on-year and 7.9% quarter-on-quarter; the average ex-factory price for Q1-Q3 was 3,611 yuan per ton, a 25.3% year-on-year increase. HAITONG INT'L expects the company's alumina costs to remain stable, with profits increasing along with rising prices. The decline in raw material prices will further increase the company's profits. - Integrated industrial chain, showcasing cost advantages. CHINAHONGQIAO has actively laid out a complete industrial chain consisting of bauxite-alumina-aluminum electrolysis-aluminum deep processing-recycled aluminum, with the company's joint venture bauxite project in Guinea (25% equity stake) having an annual capacity of about 50 million tons, alumina production capacity of 19.5 million tons (17.5 million tons domestic + 2 million tons in Indonesia), and electrolytic aluminum production capacity of 6.46 million tons (4.97 million tons in Shandong + 1.49 million tons in Yunnan). The integrated industrial chain layout has brought cost advantages to the company.