GF Securities: CHINA HONGQIAO (01378) continues its stable core operations and high dividend payouts.

GF SEC Report: Aluminum prices rise, boosting CHINAHONGQIAO profit, and is estimated to have an EPS of 3.31/3.34/3.36 yuan/share for 2026-2028. With a reference to comparable company valuations, a 12x PE for CHINAHONGQIAO in 2026 is given, resulting in a fair value of 45.15 HKD/share, maintaining a "buy" rating. Key points from GF SEC: - Company's 25-year net profit attributable to shareholders grows slightly, meeting expectations - CHINAHONGQIAO released its 25-year performance announcement, achieving operating income of 162.4 billion yuan, a year-on-year increase of 4.0%, with a net profit of 22.6 billion yuan, a year-on-year increase of 1.2%. Share of associates' profits amounted to 2.63 billion yuan, a year-on-year increase of 50%. Fixed asset impairment declined, leading to a 58% year-on-year decrease in other expenses to 1.22 billion yuan. By the end of 2025, the company's asset-liability ratio decreased by 6.0 percentage points to 42.2%. - The sales volume of the company's electrolytic aluminum products remained stable in 2025, with the increase in aluminum prices resulting in a year-on-year increase in gross profit - CHINAHONGQIAO's 2025 performance announcement revealed sales volumes of aluminum alloy, alumina, and deep-processed aluminum products at 5.82, 13.4, and 0.72 million tons, respectively, with year-on-year changes of -0.2%, +54%, and -3%. The per-ton selling prices for aluminum alloy and alumina were 18,217 and 2,899 yuan, with respective year-on-year changes of +4% and -15%. The per-ton costs were 13,034 and 2,256 yuan, with year-on-year changes of -1% and -18%. The per-ton gross profits were 5,183 and 643 yuan, with year-on-year changes of +20% and -1%. - Continued high dividend policy in 2025 - CHINAHONGQIAO intends to distribute a cash dividend of 1.65 HKD per share at the end of 2025, a year-on-year increase of 2.5%, with cash dividend ratio reaching 64% based on the latest share capital. Risk Warning: - Lower-than-expected downstream demand - Overseas electrolytic aluminum production exceeding expectations - Unexpected increases in costs such as aluminum ore, anodes, and electricity - Oversupply of recycled aluminum. (Note: Exchange rate is 1 HKD = 0.88 CNY)