Citigroup: Aluminum supply will remain tight, raising the target price of CHINAHONGQIAO (01378) to HK$36 and continuing to list it as a top pick.

Citi releases research report, maintains a "buy" rating on CHINAHONGQIAO (01378) and raises its target price from 25.2 Hong Kong dollars to 36 Hong Kong dollars, while also maintaining Hongqiao as its top stock pick. CHINAHONGQIAO management confirmed the company's commitment to enhancing shareholder returns through dividends and buybacks. According to management, the company is seeking to obtain more environmentally friendly power supply in China, a strategy also adopted by its peer Aluminum Corporation of China. Meanwhile, the company's chairman remains cautious about the prospects of expanding aluminum capacity in Indonesia. Long-term bullish on the aluminum industry Aluminum remains one of Citi's most favored industries, as the bank expects aluminum supply to remain tight, benefiting from China's capacity cap policy (annual capacity of 45.2 million tons) and no explosive capacity increase in Indonesia, resulting in sustained high aluminum industry gross margin in the long term. Citi has raised its profit forecast for CHINAHONGQIAO for 2025/26/27 by +2%/+5%/+7%, to 24.4 billion/ 27.9 billion/ 30.3 billion RMB, reflecting higher aluminum and alumina sales volumes and higher aluminum price forecasts. Management vows to enhance shareholder returns Notably, focusing on shareholder returns, the company is committed to maintaining a high dividend payout ratio and share repurchases. Despite strong stock performance year-to-date, as of November 4th closing, Hongqiao's forecast dividend yield for 2026 remains attractive at 6.7%. Citi expects Hongqiao to continue benefiting from sustained high aluminum industry gross margins, and the stock will continue to receive a valuation reassessment.