Hua Chuang Securities: Maintains "Recommended" rating on CHINAHONGQIAO (01378); share buybacks and increased holdings demonstrate development confidence; target price HK$31.7

Hua Chuang Securities released a research report maintaining a "Recommended" rating on CHINAHONGQIAO (01378). Taking into account changes in aluminum prices and alumina prices, it estimates that the company will achieve net profit attributable to shareholders of RMB 33.67 billion, RMB 33.76 billion, and RMB 35.46 billion in 2026-2028 (previous estimates: RMB 32.15 billion, RMB 34.97 billion, and RMB 38.29 billion), representing year-on-year growth of 48.7%, 0.3%, and 5.1%, respectively. With reference to the average valuation of comparable companies and the company's high dividend attribute, the bank assigns an 8x P/E ratio for 2026, with a target price of HK$31.7. The main views of Hua Chuang Securities are as follows: Benefiting from rising aluminum prices, the company's net profit attributable to shareholders reached a new high In the first half of 2026, the company's net profit attributable to shareholders was RMB 17.210 billion, up 39.2% year on year, with profit rising substantially, mainly benefiting from a year-on-year increase in the sales prices of aluminum alloy products and a year-on-year increase in both sales volume and sales prices of deep-processed aluminum alloy products. By business segment: 1) Aluminum alloy: sales volume was 2.811 million tonnes, generating operating revenue of approximately RMB 59.575 billion; the average selling price was approximately RMB 21,192/tonne (excluding VAT), up approximately 18.7% year on year; gross profit for the period was RMB 22.944 billion, and the gross margin rose to 38.5%, with product profitability rising substantially. 2) Alumina: sales volume was 6.917 million tonnes, up 8.6% year on year, generating operating revenue of approximately RMB 16.094 billion. 3) Deep-processed aluminum alloy products: sales volume was approximately 444,000 tonnes, up 23.2% year on year; operating revenue was approximately RMB 10.395 billion; the average selling price was approximately RMB 23,436/tonne (excluding VAT), up approximately 13.4% year on year; gross profit was approximately RMB 3.399 billion, with a gross margin of 32.7%. High value-added business volume expanded, and profitability improved. The company's administrative expenses increased somewhat, financial expenses continued to optimize, and the dividend from improved debt structure continued to be released In the first half of 2026, the company's three expense items showed a divergent pattern. 1) Selling and distribution expenses were RMB 363 million, up 2.5% year on year, remaining basically stable overall, with the increase mainly coming from higher freight costs brought by the expansion of the deep-processing aluminum alloy business; 2) administrative expenses were RMB 2.991 billion, up 28.8% year on year, a relatively notable increase, mainly driven by higher accruals for related taxes and fees; 3) financial expenses were RMB 1.110 billion, down 13.6% year on year, continuing the trend of optimization. The company continued to reduce interest-bearing debt and adjust the debt maturity structure, and combined with declining financing rates, achieved significant savings in interest expenses. As of the end of June 2026, the company's total liabilities were RMB 97.655 billion, down significantly from RMB 103.669 billion at the end of 2025; the asset-liability ratio fell from 42.2% to 40.5%, debt pressure continued to ease, and combined with abundant operating cash flow in the first half, the quality of the balance sheet improved. The company's large share repurchase and cancellation, combined with the controlling shareholder's increase in holdings, demonstrate recognition of the company's long-term value In 2026H1, the company actively carried out shareholder return operations. In terms of share repurchases, in the first half the company repurchased a total of 159.3 million shares for total consideration of approximately HK$5.286 billion, and all repurchased shares were cancelled; in terms of shareholder increases in holdings, the controlling shareholder CHINAHONGQIAO Holdings increased its holdings in the secondary market by a total of 41.5 million shares on June 8 and June 10, with average transaction prices of approximately HK$26.4641/26.3676. The shareholder's increase in holdings demonstrates confidence in the company's development. Risk warning: large fluctuations in aluminum prices; large fluctuations in alumina prices; significant increases in the cost of raw materials such as electricity.