Guotai Jun'an Securities International: Maintains a "buy" rating on CHINAHONGQIAO (01378) with a target price raised to HK$40.9. The company continues to benefit from the upward trend in aluminum prices.

Guotai Junan Securities International released a research report, maintaining a "buy" rating for CHINAHONGQIAO (01378) with a target price raised to HK$40.9. The bank raised its profit forecasts for the years 2025 to 2027 by 10.2%, 11.3%, and 12.6% to RMB 25.03 billion, RMB 25.38 billion, and RMB 25.946 billion. The target price was raised to HK$40.90, corresponding to a 2026 P/E ratio of 14.0, mainly considering: 1) the upward adjustment of industry valuation levels; 2) the continuous improvement of the company's profitability in the context of a positive outlook for the aluminum market. In addition, the bank believes that the recent share price pullback due to the rights issue has provided a good buying opportunity. Guotai Junan Securities International's main points are as follows: The net profit for the first three quarters of 2025 increased by 23.1% year-on-year, mainly benefiting from the rise in aluminum prices and the decrease in electricity costs Recently, CHINAHONGQIAO's core subsidiary, Shandong Hongqiao, announced its unaudited financial statements for the third quarter of 2025. In the first three quarters of 2025, operating income reached RMB 116.9 billion, a year-on-year increase of 6.2%, with net profit surging by 23.1% to RMB 19.4 billion. During the same period, the gross profit margin expanded to 25.2%, up by 1.0 percentage points year-on-year. The bank believes that the strong financial performance in the third quarter of 2025 was mainly due to the rise in aluminum prices. The aluminum price continued to rise in the third quarter, with an average price of around RMB 20,700 per ton, higher than the level of around RMB 20,200 per ton in mid-2025. In addition, as the company shifts more production capacity to Yunnan Province, it benefits from lower hydroelectric prices in the non-peak season, leading to a decrease in electricity costs for aluminum production. According to management guidance, the company expects its capacity in Yunnan Province to further increase in the fourth quarter of 2025, reaching a target of 2.16 million tons by the end of the year (significantly higher than the approximately 1.74 million tons in mid-2025). Positive share repurchase and high dividend policies demonstrate management's confidence Following the HK$2.6 billion share repurchase of 187 million shares in the first half of 2025, CHINAHONGQIAO announced in August its plan to launch a new round of repurchase plan with a scale not less than HK$3 billion (subject to market conditions). Since September 22, 2025, the company has repurchased a total of 3.54 million shares in the open market. In addition, the company's dividend payout ratios in the past three years were 46.8%, 47.0%, and 63.4%, respectively, staying above 45% since 2020. The firm commitment to shareholder returns reflects the management's clear confidence in the company's future development and firm commitment to shareholder value returns.