Guosheng Securities: Maintain a "buy" rating on CHINAHONGQIAO (01378) Q3 Shandong Hongqiao's performance is outstanding, and the advantages of aluminum integration layout are significant

Guosheng Securities released a research report stating that current capacity realization and cost reduction are key to competition at this point in time, and CHINAHONGQIAO (01378) is expected to achieve breakthrough growth through overseas expansion and deep empowerment of the upstream and downstream. The brokerage cautiously assumes that the aluminum price in 2025-2027 will be 20,000/20,500/21,000 yuan/ton, corresponding to the alumina price of 3,300/3,000/2,900 yuan/ton. The brokerage predicts that the company will achieve a net profit of 24.0/25.5/27.1 billion yuan in 2025-2027, corresponding to a PE ratio of 11.9/11.2/10.5 times, and maintains a "buy" rating. Guosheng Securities' main points are as follows: Event: The company disclosed the third quarter 2025 performance announcement of its subsidiary Shandong Hongqiao In the first three quarters of 2025, Shandong Hongqiao achieved revenue of 116.93 billion yuan, a year-on-year increase of 6%; net profit of 19.37 billion yuan, a year-on-year increase of 23%. Looking at the individual quarters, in Q1/Q2/Q3 of 2025, the revenue reached 40.2/38.0/38.7 billion yuan, a year-on-year increase of 16%/2%/2%, and a Q3 increase of 2%; achieving a net profit of 6.4/6.1/6.9 billion yuan, a year-on-year increase of 47%/11%/18%, and Q3 increase of 14%. The profitability of electrolytic aluminum has increased rapidly, and the performance in Q3 of 2025 is outstanding 1) Price: According to SMM data, the average price of electrolytic aluminum in Q3 was 20,711 yuan/ton, a year-on-year increase of 6% and a QoQ increase of 3%. The price of alumina was 3,165 yuan/ton, a year-on-year decrease of 19% and a QoQ increase of 4%. 2) Cost: According to SMM data, the full cost of electrolytic aluminum in Shandong in Q3 of 2025 was 15,299 yuan/ton; in Yunnan, it was 15,445 yuan/ton. 3) Profit: According to SMM data, the industry profit of electrolytic aluminum in Q3 was 4,125 yuan/ton, a year-on-year increase of 128% and a QoQ increase of 22%; the industry profit of alumina was 292 yuan/ton, a QoQ increase of 166%. Smooth progress in the electrolytic aluminum capacity transfer plan According to the restructuring proposal of Shandong Hontron Aluminum Industry Holding, CHINAHONGQIAO is expected to transfer 448,000 tons, 241,000 tons, and 831,000 tons from Shandong to Yunnan in 2025-2027. From 2028 onwards, the company will maintain stable total electrolytic aluminum production capacity in Shandong and Yunnan, without further adjustments. The company issued 300 million US dollars of 1.5% convertible bonds due in 2030 and simultaneous share repurchases On March 17, 2025 (after trading hours), the company and its guarantors entered into a convertible bond subscription agreement with the joint lead underwriters. Accordingly, the company has agreed to issue, and the joint lead underwriters have agreed (individually rather than jointly) to use their best efforts to subscribe for and pay or facilitate the subscription and payment of the initial principal amount of 300 million US dollars of convertible bonds. The initial conversion price (adjustable) is 20.88 Hong Kong dollars per share. The net proceeds from the sale of the convertible bonds is approximately 290 million US dollars, and the net proceeds from this issuance of convertible bonds will be used for the refinancing of existing foreign debt and general corporate purposes as stated in the company's announcement dated March 18, 2025.