With stable profits, low valuation, and substantial returns, UBS maintains a "Buy" rating on CHINAHONGQIAO (01378) with a target price of HKD 36.8.

UBS released a research report, maintaining a "Buy" rating for CHINAHONGQIAO (01378), with a target price of HK$36.8. The report indicated that CHINAHONGQIAO's net profit for the first half of 2026 was RMB 17.2 billion, a year-on-year increase of 39%, consistent with its earlier profit warning, representing 57%/53% of UBS/Visible Alpha's full-year expectations; basic earnings per share grew 32% year-on-year to RMB 1.73. UBS further analyzed that the gross profit margin of the aluminum business expanded by 13.3 percentage points year-on-year to 38.5%. The sales volume of aluminum processing products increased by 23% year-on-year to 444,000 tons, with a significant margin increase of 9.4 percentage points to 32.7%; alumina sales rose 8.6% year-on-year to 6.9 million tons. The balance sheet also showed improvement, with debt declining by 9.4% from the end of 2025 to RMB 67.4 billion, and the debt-to-asset ratio decreasing by 1.7 percentage points to 40.5%. UBS expects the market to respond positively. Shareholder returns remain robust, with the company repurchasing over HK$5.2 billion in the first half of 2026 and canceling 15.9 million shares, while reaffirming a dividend payout ratio above 60%. The current share price corresponds to a 12-month forward price-to-earnings ratio of only 6.2 times, with a forward dividend yield of 10.4%.