Standard Chartered Bank: Raises target price of CHINAHONGQIAO (01378) to HKD 29. First half performance exceeds expectations, optimistic outlook for aluminum price.

Standard Chartered Bank released a research report stating that CHINAHONGQIAO (01378) achieved better-than-expected performance in the first half of the year, with continued strengthening of profitability. Against the backdrop of optimistic aluminum price outlook, the bank remains bullish on this aluminum industry giant, maintaining a "buy" rating on CHINAHONGQIAO and raising the 12-month target price from HK$22 to HK$29. The report pointed out that CHINAHONGQIAO's performance in the first half of 2025 was remarkable. Revenue increased to RMB 81 billion, a year-on-year growth of 10.1%, mainly due to the higher average selling price (ASP) of alumina and aluminum products and increase in sales volume. The company's gross profit margin increased by 1.5 percentage points to 25.7% year-on-year; net attributable profit increased by 35% year-on-year to RMB 12.36 billion, with net profit margin increasing by 3 percentage points to 17%. In terms of financial condition, CHINAHONGQIAO's financial situation is improving. Thanks to debt structure optimization and interest rate improvement, the company's interest coverage ratio significantly increased to 17.6 times, and it plans to continue lowering its debt level in the long term. Although no interim dividend was declared in the first half of 2025, the management expects the full-year dividend payout ratio to be maintained at the stable level of 63% in the 2024 fiscal year. Based on the expected earnings per share of HK$2.60 in the 2025 fiscal year and a potential dividend payout ratio of 63%, Standard Chartered predicts a dividend yield of 7% for CHINAHONGQIAO, which is attractive to investors. The bank also predicts that strong aluminum prices may continue until 2026-2027, supported by competitive production costs and improving financial conditions, the company's high dividend payout ratio is sustainable. Looking ahead, Standard Chartered Bank expects the strong trend in aluminum prices to continue, highlighting CHINAHONGQIAO's competitive advantage. The bank pointed out that the management of CHINAHONGQIAO expects the average selling price of electrolytic aluminum to be between RMB 20,600-21,300 per ton and alumina to be between RMB 3,200-3,300 per ton in 2025, showing a strong outlook for aluminum prices. In the first half of 2025, global aluminum demand is expected to grow by 3.1%, exceeding supply growth of 1.8%. Standard Chartered Bank believes that under China's "anti-inner-loop" guidance, supply control will be strengthened, and leading companies are expected to benefit from the rise in average selling prices and market consolidation. CHINAHONGQIAO may further strengthen its cost advantage with its integrated supply chain and increased proportion of green electricity. The company aims to complete the transfer of approximately 2.2 million tons of capacity to Yunnan by the 2025 fiscal year, accounting for 34% of the total capacity.