Guotou International Securities: CHINAHONGQIAO (01378) Mid-term performance shines, high dividends attract.

Guotou International Securities published a research report stating that CHINAHONGQIAO (01378) released its interim performance: in the first half of 2026, it achieved revenue of 81.04 billion yuan (RMB, the same below), a year-on-year increase of 8.0%; net profit attributable to the parent company was 12.36 billion yuan, up 39.2% year-on-year; gross profit margin was 31%, an increase of 5 percentage points year-on-year; net profit margin was 20%, also an increase of 5 percentage points year-on-year. The rapid growth in performance is mainly attributed to the significant year-on-year increase in aluminum prices in the first half of the year and the company's excellent management level and integrated operations. The company repurchased a total of HKD 5.2 billion in shares during the first half of the year, with a dividend payout ratio of 65% last year, and it is expected to maintain high dividends this year. According to Bloombergs consensus expectations, the forecast for net profit attributable to the parent company for 2026/2027 is 33.0 billion / 32.5 billion yuan, corresponding to a P/E ratio of approximately 6.1 times. Based on the current price and a dividend payout ratio of 65%, the expected annual dividend yield is likely to approach 10%. The bank believes the company is an excellent high-dividend target and recommends investors pay attention. Guotou International Securities' main viewpoints are as follows: Increase in electrolytic aluminum prices leads to improved profit margins In the first half of the year, the company achieved a gross profit of 27.53 billion yuan, a year-on-year increase of 32.3%. Alumina sales were 6.917 million tons, up 8.6% year-on-year; electrolytic aluminum sales were 2.811 million tons, down 3.3% year-on-year; and sales of deep-processed aluminum alloy products reached 444,000 tons, an increase of 23.2% year-on-year. In the first half of the year, the energy costs were pushed up by the disruption in maritime transport due to the U.S.-Iran war, leading to a reduction in production capacity in major global electrolytic aluminum producing areas. Additionally, the sharp increase in demand for energy storage and electric grids pushed up electrolytic aluminum prices, further widening the price gap between domestic and overseas markets. According to the Shanghai Futures Exchange's aluminum price trend, the average monthly spot price in the first half of the year was approximately 24,254 yuan/ton, a year-on-year increase of 19.4%. The tight supply situation for aluminum remains, with prices expected to fluctuate at high levels in the second half of the year From the perspective of last year's overall aluminum demand, based on data from Antaike, the main downstream sectors are construction and structures (25%), electronics and electricity (21.1%), transportation (15.2%), and durable consumer goods (14.6%). Last year, there was rapid growth in electronics and electricity, transportation, machinery equipment, and durable consumer goods. However, the domestic supply side of electrolytic aluminum still maintains a production capacity ceiling of 45 million tons per year. Although there are expectations of overseas electrolytic aluminum capacity expansion, the current pace of resumption of production and expansion is slower than planned. The company expects electrolytic aluminum prices in the second half of the year will be between 23,600 yuan/ton and 24,300 yuan/ton. The alumina segment is expected to maintain an excess supply situation, with prices around 2,700 yuan/ton in the second half; however, the company's alumina costs are better than the market, currently remaining at a marginal profit level. Impairments have some impact, but are expected to be minor in the second half In the first half of the year, impairments amounted to approximately 1.1 billion yuan, mainly including raw material impairments and the impairment of two units in the power plant, due to a significant adjustment in alumina prices and the lack of renovation plans for the two units. It is expected that there will not be a significant demand for impairments in alumina in the second half of the year. Significant debt reduction results, maintaining a stable annual dividend policy In the first half of the year, the companys interest-bearing debt decreased significantly by 7 billion yuan to 67.4 billion yuan, with the asset-liability ratio declining by 1.7 percentage points to 40.5%. Financial expenses in the first half of the year decreased by 170 million yuan, and the comprehensive financing interest rate fell to 3.9%, demonstrating significant debt reduction results. On the other hand, the company maintains a stable dividend policy for the year, with a dividend payout ratio of 65% last year, and it is expected to continue the high dividend payout policy to reward shareholders this year. The company continued to repurchase shares, with a total repurchase amount reaching HKD 5.2 billion and a total of 15.9 million shares canceled. Current price suggests a dividend yield approaching 10%, recommend paying attention According to Bloomberg's consensus expectations, the forecast for net profit attributable to the parent company in 2026/2027 is 33.0 billion / 32.5 billion yuan, with expected P/E ratios of 6.1/6.1 times respectively. If calculated based on the current price and consensus forecast for net profit attributable to the parent company along with a 65% payout ratio, the companys expected annual dividend yield could approach 10%, which is considered attractive. Risk warnings Demand may be below expectations, supply releases may exceed expectations, aluminum prices may decline rapidly, and the Federal Reserve interest rates may rise.