Investment Rating - The report maintains a "Buy" rating for China Hongqiao [3] Core Views - The alumina segment continues to perform well, with significant year-on-year profit growth driven by rising aluminum and alumina prices, alongside decreasing costs for prebaked anodes and thermal coal [1] - The company is expected to benefit from the completion of its Yunnan electrolytic aluminum base relocation, which will further reduce production costs, while domestic aluminum prices are anticipated to remain high due to rigid supply and a declining interest rate cycle [1] - The report highlights the company's comprehensive layout advantages across the entire industry chain, with ongoing energy transition efforts and increasing green energy proportions [1] Financial Performance Summary - For the first three quarters of 2024, Shandong Hongqiao achieved revenue of 110.07 billion yuan, a year-on-year increase of 12%, and a net profit of 15.75 billion yuan, up 141% year-on-year [1] - Quarterly revenue for Q1-Q3 2024 was 34.8 billion, 37.3 billion, and 38 billion yuan respectively, with Q3 showing a 14% year-on-year increase and a 2% quarter-on-quarter increase [1] - The average profit for national alumina in Q3 was 1,069 yuan per ton, reflecting a 21% quarter-on-quarter increase [1] Future Projections - The company is projected to achieve net profits of 19.84 billion, 22.14 billion, and 22.31 billion yuan for 2024, 2025, and 2026 respectively, with corresponding P/E ratios of 6.2, 5.6, and 5.5 times [2][3] - Revenue forecasts for 2024, 2025, and 2026 are 156.83 billion, 161.66 billion, and 164.19 billion yuan, representing year-on-year growth rates of 17%, 3%, and 2% respectively [2]

Investment Rating - The report maintains a "Recommended" rating for China Hongqiao (01378.HK) [1][3]. Core Views - The report highlights that the increase in alumina prices has significantly enhanced the profitability of the alumina segment, with a notable increase in both revenue and net profit for the third quarter of 2024 [1]. - The company has a well-integrated industrial chain, with substantial production capacities in electrolytic aluminum and alumina, which strengthens its raw material security [1]. - The report anticipates that the transition to green energy will support long-term development and potentially enhance the company's valuation [1]. Summary by Sections Financial Performance - In Q1-3 2024, Shandong Hongqiao achieved revenue of 1100.68 billion RMB, a year-on-year increase of 12.47%, and a net profit of 157.54 billion RMB, up 141.43% year-on-year [1]. - For Q3 2024, revenue was 380.23 billion RMB, reflecting a 13.86% year-on-year growth and a 1.99% quarter-on-quarter increase, while net profit reached 59.61 billion RMB, up 38.01% year-on-year and 9.35% quarter-on-quarter [1]. Production and Pricing Insights - The report notes that in Q3 2024, electrolytic aluminum production in Shandong is expected to reach full capacity of 1.243 million tons, with alumina production also running at full capacity [1]. - The market price for alumina in Shandong increased by 290 RMB/ton, while the price for electrolytic aluminum decreased by 975 RMB/ton [1]. Future Outlook - The company is expected to achieve net profits of 177.96 billion RMB, 200.65 billion RMB, and 219.85 billion RMB for the years 2024, 2025, and 2026, respectively, with corresponding P/E ratios of 6, 5, and 5 [1][2]. - The report emphasizes the importance of the company's integrated layout in alumina, bauxite, and electrolytic aluminum, which enhances its operational efficiency and profitability [1].

Investment Rating - The report assigns an "Accumulate" rating for the company, indicating a positive outlook for its stock performance [2][3]. Core Insights - The company is a global leader in aluminum production with a comprehensive integrated supply chain, including bauxite mining, alumina production, electrolytic aluminum, and deep processing of aluminum products [2][14]. - The company achieved a revenue of 73.59 billion RMB in H1 2024, representing a year-on-year increase of 12.0%, and a net profit of 9.16 billion RMB, up 272.7% year-on-year, driven by rising aluminum prices and decreasing raw material costs [2][19]. - The domestic supply of bauxite is tightening, leading to increased reliance on imports, which enhances the resource attributes at the mining level and benefits the company due to its overseas resource layout [2][27]. - The electrolytic aluminum production capacity is nearing its ceiling, with limited supply growth expected, while demand from new energy vehicles and the power sector is anticipated to provide a boost, leading to a favorable long-term supply-demand balance [2][26]. - The company maintains a high dividend payout ratio, with a cumulative dividend of 38.17 billion RMB since its listing in 2011 and an average payout ratio of 47.2% over the past five years [2][24]. Summary by Sections 1. High Elasticity and High Dividends, Leading Integrated Layout in Electrolytic Aluminum - The company has a global leading position in electrolytic aluminum production with a complete integrated supply chain [2][14]. - In H1 2024, the company’s revenue and net profit saw significant increases, attributed to favorable market conditions [2][19]. - The company has consistently maintained a high dividend payout, reflecting its stable financial performance [2][24]. 2. Electrolytic Aluminum Industry: Capacity Approaching Ceiling, Tightening Supply at the Mining Level - The domestic supply of bauxite is becoming increasingly constrained, leading to a higher dependency on imports [2][27]. - The report highlights the limited growth in electrolytic aluminum supply due to capacity constraints and the anticipated demand from emerging sectors [2][26]. 3. Advantages of Integrated Layout, Full Release of Profit Elasticity - The company’s strategic overseas resource layout positions it well to benefit from rising bauxite prices [2][27]. - The report projects continued growth in the company’s profitability due to its cost advantages and market positioning [2][3]. 4. Profit Forecast and Valuation - The report forecasts net profits of 19 billion RMB, 20.2 billion RMB, and 21.4 billion RMB for 2024, 2025, and 2026, respectively, with a corresponding PE ratio of 6x [2][3].

Investment Rating - The report maintains a "BUY" rating for China Hongqiao [1] Core Views - The aluminum industry is expected to be significantly influenced by China's strong market policies, which, combined with a weaker US dollar and limited new supply, may drive aluminum prices up in the short term, serving as a key catalyst for Hongqiao [1] - The earnings forecasts for 2024 to 2026 have been raised by 9-12% due to the upward adjustment of aluminum price assumptions, with a 1% increase in aluminum prices estimated to boost Hongqiao's earnings per share by 4% [1] - The new target price for Hongqiao is set at HK$19.6, up from HK$17.9, based on a consistent 9.8x P/E ratio for 2024, reflecting a potential industry recovery cycle [1][28] Summary by Relevant Sections Earnings Summary - Revenue (in million RMB) is projected to grow from 131,699 in 2022 to 151,734 in 2026, with a year-on-year growth rate of 15.0% in 2021, 1.5% in 2022, and 10.5% in 2023 [2] - Adjusted net profit (in million RMB) is expected to increase from 8,702 in 2022 to 19,160 in 2026, with a significant jump in 2023 [2] - Adjusted earnings per share (in RMB) are forecasted to rise from 0.94 in 2022 to 2.02 in 2026 [2] Price Trends - The latest aluminum price in Shanghai has rebounded to RMB 20,395 per ton, reflecting a 3% increase since early September [1] - The average aluminum price for Q3 2024 is expected to be RMB 19,600 per ton, a 4% year-on-year increase [1] Supply Dynamics - China's aluminum production growth slowed to 1.3% year-on-year in August, with a capacity utilization rate of approximately 96.7% [1] - The report indicates limited meaningful supply growth due to the Chinese government's cap on production capacity [1] Valuation Metrics - Hongqiao's historical average P/E ratio over the past decade is 6x, with peaks at 10x during market cycles and lows around 3x [1][28] - The new target price reflects a valuation above the historical average, indicating potential upside based on recovery expectations [1][28]

Investment Rating - The report maintains a "BUY" rating for China Hongqiao with a target price of HK$19.60, up from the previous target of HK$17.90, indicating a potential upside of 52.9% from the current price of HK$12.82 [5][34]. Core Views - The aluminum sector is expected to benefit from China's pro-market policies, which are anticipated to increase aluminum prices in the near term. The report revises earnings forecasts for 2024E-2026E upward by 9-12% due to higher price assumptions for aluminum and alumina [3][34]. - The report highlights that a 1% increase in aluminum prices could boost Hongqiao's earnings by 4% [3]. - The company is currently trading at a mid-cycle valuation of 7x 2024E P/E, with an attractive yield of 7% [3]. Revenue and Profit Forecasts - Revenue is projected to grow from RMB 133,624 million in 2022 to RMB 151,734 million in 2026, reflecting a compound annual growth rate (CAGR) of approximately 4% [4][36]. - Adjusted net profit is expected to increase from RMB 11,461 million in 2023 to RMB 19,160 million in 2026, indicating a strong growth trajectory [4][36]. Price Trends and Market Dynamics - The Shanghai aluminum price has rebounded to RMB 20,395 per ton, a 3% increase since early September, with an average price of RMB 19,600 per ton in Q3 2024, up 4% year-on-year [3][34]. - The report notes that alumina prices have seen a significant increase of 35% year-on-year, with forecasts indicating a 34% increase in Hongqiao's alumina ASP in 2H24 [3][34]. Supply and Demand Factors - China's aluminum production growth slowed to 1.3% year-on-year in August, with a capacity utilization rate of approximately 96.7%. Limited new supply is expected due to government-imposed capacity limits [3][34]. - The report estimates that construction and automobile sectors in China account for 16% and 14% of global aluminum demand, respectively, with government policies expected to stabilize demand expectations [3][34]. Valuation Insights - The report indicates that Hongqiao has historically traded at an average forward P/E of 6x, with peaks at 10x and troughs around 3x. The new target price reflects a valuation of 9.8x 2024E P/E, which is 1.5 standard deviations above the historical average, suggesting a potential industry upcycle [3][34].

[Company Information](index=2&type=section&id=%E5%85%AC%E5%8F%B8%E8%B3%87%E6%96%99) This section provides fundamental information about the company [Financial Highlights](index=5&type=section&id=%E8%B2%A1%E5%8B%99%E6%91%98%E8%A6%81) The company achieved significant growth in revenue, gross profit, and net profit, alongside improved profitability ratios Financial Performance (For the six months ended June 30) | Metric (For the six months ended June 30) | 2024 (RMB thousands) | 2023 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Revenue | 73,592,249 | 65,733,870 | 12.0% | | Gross Profit | 17,801,761 | 5,892,364 | 202.1% | | Net Profit Attributable to Company Owners | 9,154,911 | 2,456,623 | 272.7% | | Basic Earnings Per Share (RMB Yuan) | 0.966 | 0.259 | 273.0% | | Gross Margin (%) | 24.2 | 9.0 | +15.2 percentage points | | Net Margin (%) | 13.6 | 4.5 | +9.1 percentage points | Financial Position (As of June 30) | Metric (As of June 30) | 2024 (RMB thousands) | 2023 (RMB thousands) | Change | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 37,501,630 | 29,776,735 | 25.9% | | Debt/EBITDA (times) | 1.7 | 3.6 | -1.9 times | | Debt/Total Capital (%) | 39.0 | 39.5 | -0.5 percentage points | [Chairman's Report](index=6&type=section&id=%E4%B8%BB%E5%B8%AD%E5%A0%B1%E5%91%8A) The Chairman's report highlights the company's strong financial performance driven by favorable market conditions and strategic initiatives in green development, technological innovation, and international cooperation - The Chairman's report indicates that despite a complex global economic situation, China's economy has maintained stable growth. The company benefited from rising aluminum and alumina prices, while maintaining cost advantages through its integrated upstream and downstream industrial chain and overseas resource integration, achieving significant profit growth[14](index=14&type=chunk)[15](index=15&type=chunk) Financial Metrics (For the six months ended June 30, 2024) | Financial Metric (For the six months ended June 30, 2024) | Amount | Year-on-Year Change | | :--- | :--- | :--- | | Revenue | approx. RMB 73.592 billion | +12.0% | | Gross Profit | approx. RMB 17.802 billion | +202.1% | | Net Profit Attributable to Shareholders | approx. RMB 9.155 billion | +272.7% | | Basic Earnings Per Share | approx. RMB 0.966 Yuan | +273.0% | | Interim Dividend | HK 59.0 cents per share | +73.5% (vs HK 34.0 cents) | - The company's strategy focuses on technological innovation, digitalization, and green and low-carbon transformation, with key initiatives including **green development** through clean energy utilization, **technological innovation** via research platforms like Weiqiao (Suzhou) Lightweight Research Institute, **lightweight expansion** through strategic collaborations with automotive manufacturers, and **international cooperation** by integrating into global supply chains[15](index=15&type=chunk)[16](index=16&type=chunk) - The company received high recognition in the capital market, successfully issuing various domestic bonds totaling **RMB 9.5 billion** at a historical low for medium-to-long-term bond rates, and successfully issuing **USD 300 million** senior unsecured bonds with over 7 times oversubscription[17](index=17&type=chunk) [Management Discussion and Analysis](index=10&type=section&id=%E7%AE%A1%E7%90%86%E5%B1%A4%E8%A8%8E%E8%AB%96%E8%88%87%E5%88%86%E6%9E%90) This section provides a comprehensive review of the company's operational and financial performance, along with industry trends and future strategies [Industry Review](index=10&type=section&id=%E8%A1%8C%E6%A5%AD%E5%9B%9E%E9%A1%A7) In the first half of 2024, demand from photovoltaic and new energy vehicle sectors drove an increase in non-ferrous metal prices, with aluminum prices rising significantly year-on-year, and both global and Chinese primary aluminum production and consumption growing Market Indicators (H1 2024) | Market Indicators (H1 2024) | Average Price | Year-on-Year Change | | :--- | :--- | :--- | | LME Three-Month Aluminum | approx. USD 2,401/ton | +1.6% | | SHFE Three-Month Aluminum | approx. RMB 19,846/ton | +8.2% | Production and Sales Data (H1 2024) | Production and Sales Data (H1 2024) | Global | China | | :--- | :--- | :--- | | Primary Aluminum Production | approx. 35.8 million tons (+4.0% YoY) | approx. 21.3 million tons (+5.7% YoY) | | Primary Aluminum Consumption | approx. 35.94 million tons (+5.3% YoY) | approx. 22.1 million tons (+8.2% YoY) | [Business Review](index=11&type=section&id=%E6%A5%AD%E5%8B%99%E5%9B%9E%E9%A1%A7) The company saw increased product output, notably a 30.6% rise in aluminum alloy processed products, driving a 12.0% revenue growth from higher volumes and prices, and a 272.7% surge in net profit due to improved gross margins and a lower prior-year base Product Output (H1 2024) | Product Output (H1 2024) | Output | Year-on-Year Change | | :--- | :--- | :--- | | Aluminum Alloy Products | approx. 3.221 million tons | +5.3% | | Aluminum Alloy Processed Products | approx. 0.493 million tons | +30.6% | - The company's total revenue increased by **12.0%** to **RMB 73.59 billion**, primarily driven by increases in both sales price and volume of aluminum alloy products and alumina products[23](index=23&type=chunk) - Net profit attributable to shareholders significantly increased by **272.7%** to **RMB 9.15 billion**, mainly due to (i) increased gross profit from higher volumes and prices of aluminum alloy and alumina products, coupled with lower procurement prices for key raw materials like coal and anode carbon blocks, and (ii) a lower net profit base in the first half of 2023[25](index=25&type=chunk) [Financial Review](index=12&type=section&id=%E8%B2%A1%E5%8B%99%E5%9B%9E%E9%A1%A7) This section analyzes revenue, gross profit, and expense changes across product lines, highlighting a significant increase in overall gross margin to 24.2% and proportional shifts in operating and finance costs Performance by Product Line (H1 2024) | Performance by Product Line (H1 2024) | Revenue (RMB billions) | Revenue YoY Change | Gross Margin | Gross Margin YoY Change | | :--- | :--- | :--- | :--- | :--- | | Aluminum Alloy Products | 49.312 | +7.2% | 24.6% | +15.9 percentage points | | Alumina | 16.200 | +19.7% | 25.4% | +16.5 percentage points | | Aluminum Alloy Processed Products | 7.582 | +34.3% | 21.0% | +7.4 percentage points | | **Total** | **73.592** | **+12.0%** | **24.2%** | **+15.2 percentage points** | - **Sales and distribution expenses** increased by **20.5%** year-on-year to **RMB 366 million**, primarily due to higher transportation costs from increased sales volume of alumina and aluminum alloy processed products[28](index=28&type=chunk) - **Administrative expenses** decreased by **12.6%** year-on-year to **RMB 2.454 billion**, mainly due to a reduction in research and development expenses recognized within administrative expenses[29](index=29&type=chunk) - **Finance costs** increased by **5.9%** year-on-year to **RMB 1.561 billion**, primarily due to higher interest expenses resulting from an increase in total interest-bearing debt[31](index=31&type=chunk) - **Income tax expense** increased by **343.2%** year-on-year to **RMB 3.863 billion**, mainly due to a significant increase in profit before tax[34](index=34&type=chunk) [Liquidity and Financial Resources](index=14&type=section&id=%E6%B5%81%E5%8B%95%E8%B3%87%E9%87%91%E5%8F%8A%E8%B2%A1%E5%8B%99%E8%B3%87%E6%BA%90) As of June 30, 2024, the Group's cash and cash equivalents increased to RMB 37.5 billion, supported by strong operating cash flow, while investing and financing activities resulted in net outflows for project development and debt servicing Cash Flow Statement Summary (H1 2024) | Cash Flow Statement Summary (H1 2024) | Amount (RMB thousands) | | :--- | :--- | | Net Cash Inflow from Operating Activities | 14,263,699 | | Net Cash Outflow from Investing Activities | (6,461,570) | | Net Cash Outflow from Financing Activities | (2,062,821) | - Capital expenditure during the period was approximately **RMB 5.56 billion**, primarily for construction expenses of projects such as the Yunnan Green Aluminum Innovation Industrial Park, lightweight materials base, and new energy projects[32](index=32&type=chunk) - As of June 30, 2024, the Group had cash and cash equivalents of **RMB 37.502 billion**, an **18.2%** increase from **RMB 31.721 billion** at the end of 2023[32](index=32&type=chunk) [Capital Structure](index=16&type=section&id=%E8%B3%87%E6%9C%AC%E6%9E%B6%E6%A7%8B) The Group maintains a stable capital structure with a 48.5% asset-liability ratio and RMB 103.6 billion in total liabilities, demonstrating strong risk management through a predominantly fixed-rate and RMB-denominated debt portfolio, optimized by recent bond issuances Capital Structure Metrics (As of June 30, 2024) | Capital Structure Metrics (As of June 30, 2024) | Value | Comparison (As of December 31, 2023) | | :--- | :--- | :--- | | Total Liabilities | approx. RMB 103.63 billion | approx. RMB 94.06 billion | | Asset-Liability Ratio | approx. 48.5% | approx. 47.0% | | Total Bank Borrowings | approx. RMB 44.04 billion | - | | Net Current Assets | approx. RMB 20.51 billion | - | - Debt composition includes approximately **87.3%** of bank borrowings at fixed interest rates and **12.7%** at floating rates, with approximately **87.0%** of total debt denominated in RMB and **13.0%** in foreign currencies[38](index=38&type=chunk)[40](index=40&type=chunk) [Future Outlook](index=18&type=section&id=%E6%9C%AA%E4%BE%86%E5%B1%95%E6%9C%9B) Despite global uncertainties, the Group remains confident in China's economic outlook, focusing on high-quality development and new productive forces through green and technological innovation to lead industry transformation - The company's future strategic core is to promote **high-quality development** and foster **new productive forces**[45](index=45&type=chunk) - Two major strategic focuses include **green and low-carbon** for continuous green transformation and **technological innovation** to deeply integrate industrial, innovation, and talent chains[45](index=45&type=chunk) [Supplementary Information](index=19&type=section&id=%E8%A3%9C%E5%85%85%E8%B3%87%E6%96%99) This section provides additional disclosures on major shareholders' interests, convertible bonds and senior notes, and corporate governance practices [Major Shareholders' Interests](index=19&type=section&id=%E4%B8%BB%E8%A6%81%E8%82%A1%E6%9D%B1%E5%8F%8A%E5%85%B6%E4%BB%96%E4%BA%BA%E5%A3%AB%E6%96%BC%E8%82%A1%E4%BB%BD%E5%8F%8A%E7%9B%B8%E9%97%9C%E8%82%A1%E4%BB%BD%E4%B8%AD%E7%9A%84%E6%AC%8A%E7%9B%8A%E5%8F%8A%E6%B7%A1%E5%80%89) This section discloses the interests of major shareholders in the company's shares as of June 30, 2024, with Chiping Xingwang Private Trust Company (via China Hongqiao Holdings) being the largest shareholder holding approximately 64.27% of shares, and CITIC Group Corporation and its associates collectively holding approximately 8.98% long positions Major Shareholders' Interests (As of June 30, 2024) | Shareholder Name | Capacity/Nature of Interest | Total Number of Shares Held (Long Position) | Approximate Percentage (%) | | :--- | :--- | :--- | :--- | | Chiping Xingwang Private Trust Company | Trustee | 6,090,031,073 | 64.27 | | China Hongqiao Holdings Limited | Beneficial Owner | 6,090,031,073 | 64.27 | | Ms. Zhang Hongxia | Interest of Person Acting in Concert | 6,098,901,073 | 64.36 | | Ms. Zhang Yanhong | Interest of Person Acting in Concert | 6,098,901,073 | 64.36 | | CITIC Limited | Interest in Controlled Corporation | 850,625,461 | 8.98 | | CITIC Group Corporation | Interest in Controlled Corporation | 850,625,461 | 8.98 | [Convertible Bonds and Senior Notes](index=22&type=section&id=%E5%8F%AF%E6%8F%9B%E8%82%A1%E5%82%B5%E5%88%B8%E5%8F%8A%E5%84%AA%E5%85%88%E7%A5%A8%E6%93%9A) This section details the company's convertible bonds and senior notes, including multiple adjustments to the conversion price of the 5.25% convertible bonds due 2026 to HKD 6.54 per share due to dividend distribution, the full redemption of the maturing USD 500 million senior notes, and the new issuance of USD 300 million senior unsecured notes - Due to the company's declaration of the 2023 final dividend, the conversion price of the **USD 300 million** convertible bonds due 2026 was adjusted from **HKD 6.82** per share to **HKD 6.54** per share, effective May 31, 2024[57](index=57&type=chunk) - The company fully redeemed the principal amount of **USD 500 million** of 6.25% senior unsecured notes due 2024 upon their maturity on June 8, 2024[58](index=58&type=chunk) - The company newly issued **USD 300 million** in principal amount of 7.75% senior unsecured notes due 2025 on March 25, 2024[58](index=58&type=chunk) [Corporate Governance](index=25&type=section&id=%E9%81%B5%E5%AE%88%E4%BC%81%E6%A5%AD%E7%AE%A1%E6%B2%BB%E5%AE%88%E5%89%87) During the reporting period, the company largely complied with the Corporate Governance Code, with one deviation where Mr. Zhang Bo serves as both Chief Executive Officer and Chairman of the Board, a dual role the Board believes benefits the company's stable business development - The company has one deviation from the Corporate Governance Code: Mr. Zhang Bo serves as both Chief Executive Officer and Chairman of the Board, whereas Code Provision C.2.1 stipulates that the roles of chairman and chief executive should be separate[61](index=61&type=chunk) - The Board explains that considering Mr. Zhang Bo's extensive management experience and industry knowledge, this arrangement is beneficial for the Group's continuous and stable business development, and the current Board composition ensures a balance of power and authority[61](index=61&type=chunk) [Interim Condensed Consolidated Financial Information](index=26&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99) This section presents the interim condensed consolidated financial statements, including the review report, statement of profit or loss, statement of financial position, statement of cash flows, and explanatory notes [Review Report](index=26&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99%E4%B9%8B%E5%AF%A9%E9%96%B1%E5%A0%B1%E5%91%8A) The auditor, Shinewing (HK) CPA Limited, has reviewed the Group's interim condensed consolidated financial information in accordance with Hong Kong Standard on Review Engagements, concluding that there is no evidence suggesting the financial information is not prepared in all material respects in accordance with International Accounting Standard 34, "Interim Financial Reporting" - The auditor concluded that based on their review work, nothing has come to their attention that causes them to believe the interim condensed consolidated financial information is not prepared, in all material respects, in accordance with International Accounting Standard 34[65](index=65&type=chunk) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=27&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E6%90%8D%E7%9B%8A%E5%8F%8A%E5%85%B6%E4%BB%96%E5%85%A8%E9%9D%A2%E6%94%B6%E7%9B%8A%E8%A1%A8) For the six months ended June 30, 2024, the company reported revenue of RMB 73.59 billion, a 12.0% year-on-year increase; gross profit of RMB 17.80 billion, up 202.1%; profit for the period (net profit) reached RMB 10.01 billion, a 236.7% increase; and net profit attributable to company owners was RMB 9.15 billion, up 272.7% Profit or Loss Statement Item (For the six months ended June 30) | Profit or Loss Statement Item (For the six months ended June 30) | 2024 (RMB thousands) | 2023 (RMB thousands) | Year-on-Year Change | | :--- | :--- | :--- | :--- | | Revenue | 73,592,249 | 65,733,870 | +12.0% | | Gross Profit | 17,801,761 | 5,892,364 | +202.1% | | Profit Before Tax | 13,870,989 | 3,843,698 | +260.9% | | Profit for the Period | 10,007,876 | 2,972,024 | +236.7% | | Profit Attributable to Company Owners | 9,154,911 | 2,456,623 | +272.7% | [Condensed Consolidated Statement of Financial Position](index=28&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E7%8B%80%E6%B3%81%E8%A1%A8) As of June 30, 2024, the Group's total assets reached RMB 213.71 billion, total liabilities were RMB 103.63 billion, resulting in an asset-liability ratio of 48.5%, and total equity was RMB 110.08 billion, a 3.6% increase from the end of 2023, with both non-current and current assets growing, including cash and cash equivalents increasing to RMB 37.50 billion Balance Sheet Item | Balance Sheet Item | As of June 30, 2024 (RMB thousands) | As of December 31, 2023 (RMB thousands) | | :--- | :--- | :--- | | **Total Assets** | **213,707,665** | **200,320,085** | | Non-current Assets | 116,725,397 | 112,925,122 | | Current Assets | 96,982,268 | 87,394,963 | | **Total Liabilities** | **103,632,190** | **94,063,640** | | Current Liabilities | 76,469,447 | 74,029,126 | | Non-current Liabilities | 27,162,743 | 20,034,514 | | **Total Equity** | **110,075,475** | **106,256,445** | [Condensed Consolidated Statement of Cash Flows](index=32&type=section&id=%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E7%8F%BE%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) In the first half of 2024, the Group generated a strong net cash inflow of RMB 14.26 billion from operating activities, a net cash outflow of RMB 6.46 billion from investing activities primarily for property, plant, and equipment purchases, and a net cash outflow of RMB 2.06 billion from financing activities mainly for dividend and interest payments and debt repayment, resulting in a net increase in cash and cash equivalents of RMB 5.74 billion at period-end Cash Flow Statement Item (For the six months ended June 30) | Cash Flow Statement Item (For the six months ended June 30) | 2024 (RMB thousands) | 2023 (RMB thousands) | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 14,263,699 | 7,087,021 | | Net Cash Used in Investing Activities | (6,461,570) | (6,060,284) | | Net Cash (Used in) Generated from Financing Activities | (2,062,821) | 1,215,205 | | **Net Increase in Cash and Cash Equivalents** | **5,739,308** | **2,241,942** | | **Cash and Cash Equivalents at End of Period** | **37,501,630** | **29,776,735** | [Notes to the Interim Condensed Consolidated Financial Information](index=34&type=section&id=%E4%B8%AD%E6%9C%9F%E7%B0%A1%E6%98%8E%E7%B6%9C%E5%90%88%E8%B2%A1%E5%8B%99%E8%B3%87%E6%96%99%E9%99%84%E8%A8%BB) The notes to the financial statements provide detailed explanations of financial statement items, including revenue breakdown by product and region, reasons for the significant increase in income tax expense, dividend distribution details, bank borrowing structure, changes in convertible bond terms, and significant related party transactions - **Revenue composition (Note 4)**: Of the total revenue of **RMB 73.59 billion**, liquid aluminum alloy contributed **RMB 45.22 billion**, and alumina products contributed **RMB 16.20 billion**; by region, revenue from the Chinese market was **RMB 69.53 billion**, accounting for **94.5%** of total revenue[94](index=94&type=chunk) - **Dividends (Note 9)**: The 2023 final dividend, totaling approximately **RMB 2.50 billion**, was recognized and paid during the reporting period; the Board resolved to declare an interim dividend of **HK 59.0 cents** per share for 2024[102](index=102&type=chunk) - **Bank borrowings (Note 24)**: As of June 30, 2024, total bank borrowings amounted to **RMB 44.04 billion**, of which **RMB 34.43 billion** were current borrowings due within one year; total secured borrowings were **RMB 12.21 billion**[128](index=128&type=chunk) - **Related party transactions (Note 37)**: Several significant related party transactions occurred during the period, including the purchase of bauxite from GTS for **RMB 8.85 billion**, electricity from Bineng Energy for **RMB 6.66 billion**, and anode carbon blocks from Chuangxin Carbon Materials for **RMB 690 million**[177](index=177&type=chunk)[179](index=179&type=chunk)

Investment Rating - The report maintains an "OUTPERFORM" rating for China Hongqiao Group [3][4][10] Core Views - Rising prices of aluminum products and decreasing costs of major raw materials have significantly improved the company's profitability [8][9] - The company has a fully integrated industrial chain, which provides substantial cost advantages [9] - The global economic outlook is positive, with expectations for continued growth in aluminum demand driven by industries such as photovoltaics and new energy vehicles [9][10] Financial Performance Summary - For the first half of 2024, the company achieved operating income of RMB 73.59 billion, a year-on-year increase of 12.0% [7] - Gross profit reached RMB 17.80 billion, up 202.1% year-on-year, with a gross profit margin of 24.2%, an increase of 15.2 percentage points [7] - Net profit attributable to the parent company was RMB 9.155 billion, a year-on-year increase of 272.7% [7] - The company plans to distribute an interim dividend of HK$0.59 per share, a 73.5% increase year-on-year [7] Revenue and Profit Forecast - The forecast for operating income from 2024 to 2026 is RMB 1497.7 billion, RMB 1569.9 billion, and RMB 165.24 billion respectively [10] - Expected EPS for the same period is RMB 1.99, RMB 2.03, and RMB 2.20 per share [10] - The target price is set at HK$15.12, based on a valuation of 8x PER for 2024 [10] Segment Performance - Electrolytic aluminum segment reported revenue of RMB 49.31 billion, a 7.2% increase year-on-year, with a gross profit margin of 24.6% [8] - Alumina segment achieved revenue of RMB 16.20 billion, a 19.7% increase year-on-year, with a gross profit margin of 25.4% [8] - Aluminum processing segment saw revenue of RMB 7.58 billion, a 34.3% increase year-on-year, with a gross profit margin of 21.0% [8]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company reported a significant increase in net profit attributable to shareholders, achieving 9.155 billion yuan, a year-on-year increase of 272.7% [3] - The company benefits from rising alumina prices, with a notable performance across its three main business segments: aluminum products, alumina, and aluminum processing [3] - The integrated business model enhances profitability, with overall gross margin improving to approximately 24.2%, up by 15.2 percentage points year-on-year [3] - Future net profit forecasts for 2024, 2025, and 2026 are 19.232 billion yuan, 20.628 billion yuan, and 22.144 billion yuan respectively, reflecting an upward revision based on cost optimization [3] Summary by Relevant Sections Financial Performance - The company achieved operating revenue of 73.592 billion yuan, a year-on-year increase of 12% [3] - The revenue from aluminum alloy products was 49.312 billion yuan, up 7.25% year-on-year, with production and sales volumes increasing by 5.3% and 0.5% respectively [3] - Alumina revenue reached 16.2 billion yuan, a year-on-year increase of 19.72%, with sales volume up approximately 2.4% [3] - The company declared an interim dividend of 0.59 HKD per share, compared to 0.34 HKD in the same period last year [3] Profitability - The gross margin for aluminum alloy products was approximately 24.6%, up by 15.9 percentage points year-on-year, driven by rising sales prices and declining raw material costs [3] - The gross margin for alumina products was about 25.4%, an increase of 16.5 percentage points year-on-year, primarily due to higher alumina prices [3] - The company’s overall profitability is expected to improve further due to the upward trend in alumina and electrolytic aluminum prices [3] Future Outlook - The company is expected to maintain its integrated advantage in the aluminum industry, with projected net profits for the next three years showing significant growth [3] - The price forecasts for alumina and electrolytic aluminum are expected to remain favorable, supporting the company's earnings potential [3]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected relative increase in stock price of over 15% in the next 6 to 12 months [2][12]. Core Views - The company has demonstrated strong financial performance, with a significant increase in revenue and net profit. For the reporting period, the company achieved a revenue of 136.165 billion RMB, a year-on-year growth of 12%, and a net profit of approximately 11.461 billion RMB, reflecting a year-on-year increase of about 273% [2][3]. - The company announced an interim dividend of 0.59 HKD per share, representing a payout ratio increase from 48% to 56%, with a dividend yield of 5.6% based on the closing price [2][3]. - The report highlights the company's strong dividend characteristics and the evolving structure of its business, emphasizing its "resource-rich" attributes [2][3]. Financial Performance Summary - **Revenue Forecast**: - 2023A: 136.165 billion RMB - 2024E: 182.545 billion RMB (34% growth) - 2025E: 199.568 billion RMB (9% growth) - 2026E: 217.674 billion RMB (9% growth) [2][3] - **Net Profit Forecast**: - 2023A: 11.461 billion RMB - 2024E: 20.963 billion RMB (83% growth) - 2025E: 24.793 billion RMB (18% growth) - 2026E: 29.876 billion RMB (21% growth) [2][3] - **Earnings Per Share (EPS)**: - 2023: 1.21 RMB - 2024E: 2.21 RMB - 2025E: 2.62 RMB - 2026E: 3.15 RMB [2][3] - **Price-to-Earnings (P/E) Ratio**: - 2023: 8.1 - 2024E: 4.4 - 2025E: 3.8 - 2026E: 3.1 [2][3] Industry Insights - The report discusses the supply-demand dynamics in the alumina market, noting that while there is an oversupply, production may be constrained by raw material bottlenecks. The dependence on imported bauxite, particularly from Guinea, poses risks to alumina production and pricing [3]. - The relationship between alumina and electrolytic aluminum prices is highlighted, with historical stability in their price ratio. The report suggests that the market may underestimate the benefits of alumina during periods of rising electrolytic aluminum prices [3].

Investment Rating - The investment rating for the company is "Outperform the Market" [3][17][20] Core Views - The company has significantly improved its profitability due to the rise in alumina and aluminum prices, with a 273% increase in net profit attributable to shareholders in H1 2024 [1][4] - The company plans to maintain a high dividend payout ratio, declaring an interim dividend of 0.59 HKD per share, totaling approximately 5.59 billion HKD [1][4] - The report anticipates stable raw material prices and a favorable aluminum industry cycle, which will enhance the company's sustainable development capabilities [1][17] Financial Performance Summary - In H1 2024, the company reported revenue of 736 billion CNY, a year-on-year increase of 12%, and a net profit of 91.5 billion CNY, up 273% [1][4] - The operating cash flow for the period was 142.6 billion CNY, reflecting a 101% increase compared to the previous year [1][4] - The company's aluminum alloy product gross profit reached 12.1 billion CNY, an increase of 8 billion CNY from the same period last year [1][4] - The average selling price of electrolytic aluminum was 17,379 CNY/ton, with a gross profit of 4,280 CNY/ton, while the cost of sales was 13,100 CNY/ton [1][4] Production and Cost Analysis - The production volume of aluminum alloy products in H1 2024 was 3.221 million tons, with an annualized capacity of 6.442 million tons, indicating near full capacity utilization [1][4] - The report highlights a decrease in electrolytic aluminum costs by 1,770 CNY/ton, primarily due to lower prices for prebaked anodes and coal [1][4] - The gross profit for alumina sales was 4.1 billion CNY, with an average selling price of 2,942 CNY/ton, up 426 CNY/ton from the previous year [5] Future Projections - The company expects revenues of 134.1 billion CNY for 2024, with net profits projected at 20.16 billion CNY, reflecting a year-on-year growth rate of 75.9% [2][17] - The diluted EPS is forecasted to be 2.13 CNY for 2024, with a PE ratio of 4.5 [2][17] - The report assumes stable prices for aluminum and alumina, with an average aluminum price of 19,500 CNY/ton and alumina at 3,600 CNY/ton for the years 2024-2026 [17]