UBS: CHINAHONGQIAO (01378) Q3 performance exceeds expectations, maintains "buy" rating.

On October 30, 2025, UBS released a performance review report on CHINAHONGQIAO Group (01378), focusing on the analysis of the third quarter performance of its core subsidiary, Shandong Hongqiao, in 2025. The company's performance in Q3 2025 exceeded expectations, and the rating was maintained as "Buy." In terms of performance, Shandong Hongqiao's net profit for the first 9 months of 2025 was 19.4 billion yuan, a year-on-year increase of 23%. Based on this estimate, CHINAHONGQIAO's net profit for the first 9 months of 2025 was 21 billion yuan, achieving 87% of the 2025 market consensus (24.2 billion yuan) and 84% of UBS's expectations (25 billion yuan). Shandong Hongqiao's net profit for Q3 2025 was 6.9 billion yuan, a 17% increase year-on-year, higher than UBS's previous preview of 6.5 billion yuan; CHINAHONGQIAO's net profit for Q3 2025 is estimated at 7.4 billion yuan, slightly exceeding market expectations by 5-7%. In terms of the factors affecting performance, the change in profit price difference for aluminum and alumina contributed 1.1 billion yuan to the gross profit change, providing positive support for the performance; at the same time, selling, general, and administrative expenses (SG&A) decreased by 1 billion yuan compared to the previous quarter, but income from joint ventures and associated companies decreased by 300 million yuan, and non-operating costs increased by 100 million yuan, with multiple factors contributing to the current performance. Looking ahead, UBS maintains a positive outlook for the aluminum industry in the next two years, believing that there is still growth potential in aluminum demand and that the industry's overall profitability level is supported; at the same time, as a leading company in the industry, CHINAHONGQIAO has a scale advantage of 6.46 million tons of aluminum and 19.5 million tons of alumina, with a solid financial structure, and is expected to further unleash profitability potential during the industry's upward cycle. UBS points out that CHINAHONGQIAO faces two key risks: one is that the balance of supply and demand for aluminum and alumina is weaker than expected, leading to a drop in product prices and squeezing profit margins; the other is that electricity prices in China (especially in Yunnan province) rise more than expected, and as aluminum smelting is an energy-intensive industry, a rise in electricity prices will directly increase production costs and affect profitability. In terms of valuation and investment rating, UBS gives CHINAHONGQIAO a "Buy" rating. In terms of financial forecasts, UBS is optimistic about CHINAHONGQIAO's future profitability, forecasting diluted earnings per share (EPS) of 2.66 yuan, 3.12 yuan, and 3.33 yuan for 2025, 2026, and 2027 respectively, all higher than market consensus. Meanwhile, revenue is forecasted to stabilize around 1.6 trillion yuan from 2025 to 2029, with EBIT profit margins maintained in the range of 22%-25%, demonstrating stable profitability.