Guolian Minsheng Securities: Maintains "buy" rating for CHINAHONGQIAO (01378) with 25H1 earnings forecast showing significant year-on-year net profit increase.

Guolian Minsheng Securities released a research report stating that it is expected that the net profit attributable to CHINAHONGQIAO (01378) in 2025-2027 will be 22.759/26.169/28.969 billion yuan respectively, with year-on-year growth of 1.73%/14.98%/10.70% respectively. EPS will be 2.40/2.76/3.05 yuan/share respectively, maintaining a "buy" rating. In the medium to long term, the policy of "anti-inner loop" continues to strengthen, and the pace of new capacity production of alumina may slow down, thereby improving the overcapacity situation. The company released a positive profit forecast, expecting a net profit of around 12.359 billion yuan in the first half of 2025, a year-on-year growth of about 35%. Guolian Minsheng Securities points out the following: The logic of supply constraints supports the upward trend of aluminum prices, alumina may benefit from the "anti-inner loop" Domestic electrolytic aluminum capacity is close to the ceiling, and future new capacity may be limited; resilience in demand from the power grid, new energy vehicles, etc., is expected to gradually reveal the supply-demand gap of electrolytic aluminum, driving the central price of aluminum upward. In the short term for alumina, under the background of oversupply, the price may fluctuate around the cost line; with Guinea entering the rainy season in Q3, the shipment volume of bauxite may decrease, supporting the stabilization of its price, and alumina prices are also expected to remain volatile. On July 29, 2025, the China Nonferrous Metals Industry Association stated that it will "strictly control the new alumina production capacity". In the medium to long term, the policy of "anti-inner loop" continues to strengthen, and the pace of new alumina production capacity is expected to slow down, thereby improving the overcapacity situation. Integrated leading player in the aluminum industry chain, high year-on-year growth in net profit in the first half of 2025 According to the company's positive profit forecast, the company is expected to achieve a net profit of around 12.359 billion yuan in the first half of 2025, a year-on-year growth of about 35%. The company's performance has greatly increased, mainly benefiting from the year-on-year increase in aluminum prices, combined with a year-on-year decline in the cost end of coal. Electrolytic aluminum is the company's main source of revenue and profit, with the company's alumina primarily used for self-production, with some external sales. Increased equity production capacity of electrolytic aluminum, with both growth and scarcity As of the end of March 2025, the company has a total electrolytic aluminum production capacity of 6.459 million tons. In February 2025, the company's affiliated company Shandong Light Jin repurchased/acquired 1.44% minority equity of Shandong Hongqiao held by the company's shareholder CCB Financial Assets and completed the change of business information shareholder registration. In November 2019, the company, with Yunnan Hongtai as the main body, built 2.03 million tons of green aluminum production capacity in Yunnan. The company holds 75% equity of Yunnan Hongtai through its subsidiary Yunnan Hongqiao (company's shareholding ratio is 95.29%). In July 2025, Yunnan Hongqiao increased its equity share in Yunnan Hongtai from 75% to 100%, increasing the company's electrolytic aluminum equity production capacity in Yunnan by 483,600 tons to 1.934 million tons. Resonance of cycles and dividends, highlighting the value of leading high dividend stocks Benefiting from the upward cycle of aluminum prices, the company's profits and dividends continue to grow. In 2023-2024, the total dividends of the company were 5.46/13.87 billion yuan respectively, with dividend ratios of 47.6%/62.0% respectively. Due to large price fluctuations in cyclical industries, corporate profits and dividends will also fluctuate. However, the aluminum industry supply and demand pattern is high-quality, and the company is located on the left side of the cost curve, coupled with the basic end of major capital expenditures, the company has the conditions for high dividends. The bank predicts that the company's net profit in 2025 will be 22.76 billion yuan. Assuming that the dividend ratio in 2025 remains the same as in 2024, the dividend yield will be 8.0%. The current stock price corresponds to a P/E ratio of 8.5 times, and the valuation and dividend yield are still attractive. On August 1, 2025, the Ministry of Finance issued the "Announcement on the Value-added Tax Policy on Interest Income of Government Bonds and Other Bonds", effective from August 8, 2025, the interest income of new government bonds, local government bonds, and financial bonds will resume the collection of value-added tax. After the resumption of taxation on government bonds and other bond varieties, the actual income of financial institutions holding them will decrease. The bank believes that high-quality high dividend leaders represented by the company may be favored by institutions, bringing opportunities for value reassessment.