Bank of America: Maintains "Buy" rating on CHINAHONGQIAO (01378), optimistic about aluminum price prospects and high dividend returns.

The recent mid-term performance report for CHINAHONGQIAO (01378), a global leader in the aluminum industry, has garnered widespread attention in the market. Bank of America Securities published a research report on August 24, maintaining a "Buy" rating for CHINAHONGQIAO with a target price of HKD 30. Mid-term Performance: Net Profit Increased by 39%, Gross Margin Significantly Improved According to CHINAHONGQIAO's mid-term performance announcement for 2026 released on August 21, the company achieved operating revenue of 87.506 billion yuan (RMB, the same below) in the first half of the year, representing an 8% year-on-year increase; the net profit attributable to shareholders reached 17.210 billion yuan, a year-on-year increase of 39.2%, consistent with previous profit warnings. The research report from Bank of America Securities pointed out that the performance growth was primarily driven by the rise in aluminum prices. In the first half of the year, the average selling price of aluminum alloy increased by 18.7% year-on-year to 21,192 yuan per ton. The performance of deep-processing products was remarkable, with sales increasing by 23.2% year-on-year to 444,000 tons and revenue up 40% year-on-year. The groups gross margin expanded by 5.8 percentage points year-on-year to 31.5%, with the aluminum alloy business margin soaring from 25.2% to 38.5%. Balance Sheet Continues to Optimize, Positive Shareholder Returns In terms of cash flow, the operating cash inflow for the first half of the year was 22.1 billion yuan, demonstrating strong performance. Bank loans decreased by 17.4% from the end of last year to 35.9 billion yuan, and the debt-to-asset ratio improved from 42.2% to 40.5%. During the reporting period, the company spent HKD 5.2 billion to repurchase and cancel 15.9 million shares, and the controlling shareholder also increased its stake by 41.5 million shares, demonstrating managements confidence. Outlook for the Aluminum Industry, Project Reserves and Capital Management Given the ongoing global supply tightness and resilient demand for aluminum from power infrastructure, energy storage, and export markets, management holds a constructive view on the fundamentals of aluminum. In the first half of 2026, capital expenditure significantly fell to 3.7 billion yuan, while the company continues to advance the Yunnan green aluminum project, expand the capacity for lightweight materials, and invest in the project related to Ximangdu. Additionally, the affiliated company Shandong Hongqiao Aluminum Holdings (002379.SZ) disclosed a private placement plan on July 31, intending to raise no more than 12 billion yuan to support renewable energy development, downstream aluminum processing businesses, and balance sheet optimization. Valuation and Rating: 6x PE is Attractive, Dividend Yield Around 10% Based on the discounted cash flow valuation method (WACC 9.0%, terminal growth rate 1%), Bank of America Securities has set a target price of HKD 30. Meanwhile, given the reasonable valuation, the "Buy" rating is maintained. The research report indicates that the current stock price corresponds to an estimated price-to-earnings ratio of only about 6.5 times for 2026 and a dividend yield of approximately 10%. Bank of America believes the rationale for buying includes a constructive outlook on aluminum prices, an attractive dividend yield of about 10%, continued buybacks supporting the stock price, and an estimated price-to-earnings ratio of about 8 times in 2027.