Core Viewpoint - China Hongqiao has announced a significant increase in its dividend for 2024, reflecting strong financial performance and a commitment to high shareholder returns [1][5] Financial Performance - In 2024, China Hongqiao achieved revenue of 156.17 billion yuan, a year-on-year increase of 16.9%, with gross profit reaching 42.16 billion yuan, up 101.2% [1] - The net profit attributable to shareholders was 22.37 billion yuan, representing a 95.2% increase year-on-year, with gross margin and net profit margin improving to 27% and 14.33% respectively [1] - The company's return on equity (ROE) reached a historical high of 20.75%, an increase of 8.33 percentage points year-on-year [1] Dividend Strategy - The board declared a final dividend of 1.02 HKD per share, leading to a total annual dividend of 1.61 HKD per share, a remarkable increase of 156% year-on-year, marking a historical high [1] - The company maintains a strong cash position with cash equivalents amounting to 44.77 billion yuan as of December 2024, supporting its high dividend policy [1] Product Performance - China Hongqiao's three core product lines experienced volume and price increases, contributing to stable revenue growth [2] - Revenue from aluminum alloy products was 102.43 billion yuan, up 8.23%, while aluminum processing products and alumina revenues increased by 35.4% and 40.64% respectively [2] - The overall gross margin for the company's products was approximately 27%, an increase of 11.3 percentage points year-on-year, with specific margins for aluminum alloy, aluminum processing, and alumina products improving significantly [3] Market Demand and Strategy - Global primary aluminum production and consumption showed stable growth, with China accounting for a significant share of the market [3] - The company is focused on high-quality development, emphasizing long-term strategies and innovation, while enhancing operational efficiency through digital transformation [3] - China Hongqiao is actively pursuing ESG initiatives and has received recognition for its efforts in sustainable development and resource recycling [4] Shareholder Returns and Market Outlook - The company has a history of returning value to shareholders through dividends and share buybacks, with an average payout ratio of 44.4% since 2007 [5] - Analysts have a positive outlook on the company, with a target price increase to 17.7 HKD per share, reflecting confidence in its business model and dividend policy [5] - The stock has shown significant price appreciation, with a 113.43% increase in 2024 and a continued upward trend into 2025, while maintaining an attractive dividend yield of nearly 6% [5]

Financial Performance - Revenue increased by approximately 16.9% year-on-year, reaching approximately RMB 156.17 billion[4] - Gross profit increased by approximately 101.2% year-on-year, amounting to approximately RMB 42.16 billion[4] - Annual profit increased by approximately 96.4% year-on-year, totaling approximately RMB 24.55 billion[4] - Net profit attributable to shareholders increased by approximately 95.2% year-on-year, reaching approximately RMB 22.37 billion[4] - Basic earnings per share increased by approximately 95.2% year-on-year, recorded at approximately RMB 2.3611[4] - The company's revenue for the year was approximately RMB 156.17 billion, an increase of about 16.9% year-on-year[58] - Gross profit reached approximately RMB 42.16 billion, reflecting a year-on-year increase of about 101.2%[58] - Net profit attributable to shareholders was approximately RMB 22.37 billion, up about 95.2% year-on-year[58] - Basic earnings per share were approximately RMB 2.3611, compared to RMB 1.2095 in the same period last year[58] Dividends - Proposed final dividend of HKD 1.02 per share, totaling HKD 1.61 per share for the fiscal year 2024, compared to HKD 0.63 per share for fiscal year 2023[4] - The company declared an interim dividend of HKD 0.59 per share for 2024, compared to HKD 0.12 per share in 2023, reflecting a substantial increase[39] - The board proposed a final dividend of HKD 1.02 per share for the year ending December 31, 2024, which, along with the interim dividend of HKD 0.59, totals HKD 1.61 per share for the fiscal year 2024, compared to HKD 0.63 per share for 2023[115][117] Assets and Liabilities - Cash and cash equivalents increased to approximately RMB 44.77 billion from RMB 31.72 billion year-on-year[10] - Trade receivables increased to approximately RMB 9.77 billion from RMB 5.49 billion year-on-year[10] - Total assets increased to approximately RMB 109.82 billion from RMB 87.39 billion year-on-year[10] - Net assets attributable to shareholders increased to approximately RMB 107.80 billion from RMB 92.24 billion year-on-year[12] - The total liabilities of the group as of December 31, 2024, are approximately RMB 110,551,534,000, compared to RMB 94,063,640,000 as of December 31, 2023, with a debt-to-asset ratio of about 48.2%[89] Trade Receivables and Payables - Trade receivables for 2024 amounted to RMB 9,783,057, up from RMB 5,496,090 in 2023, indicating an increase of about 77.5%[42] - The aging analysis of trade receivables shows that RMB 6,583,327 is within 3 months, compared to RMB 4,883,108 in 2023, reflecting a growth of 34.7%[44] - Trade payables to third parties increased to RMB 11,863,104 in 2024 from RMB 10,764,251 in 2023, marking a rise of approximately 10.2%[45] Capital Expenditure and Investments - The group's capital expenditure for the year was approximately RMB 12.61 billion, mainly for construction projects related to quality assurance, green aluminum innovation, and lightweight materials[80] - As of December 31, 2024, the group's capital commitments related to property, plant, and equipment amount to approximately RMB 7,455,180,000, primarily for the construction of the Yunnan Green Aluminum Innovation Industrial Park, lightweight materials base, and new energy projects[82] - The company plans to acquire 100% equity of Shandong Hongtuo Industrial Co., Ltd., which will increase its stake in Shandong Hongchuang Aluminum Industry Holdings Co., Ltd.[51] Financial Instruments and Standards - The group has adopted new and revised International Financial Reporting Standards (IFRS) effective from January 1, 2024, including IFRS 16 regarding lease liabilities in sale and leaseback transactions[15] - The application of IFRS 1 amendments clarifies the classification of liabilities as current or non-current, which will not significantly impact the group's financial performance for the current and prior years[17] - The group has not early adopted any new IFRS that have been issued but are not yet effective, indicating a cautious approach to upcoming regulatory changes[18] - IFRS 18, which will replace IAS 1 regarding the presentation of financial statements, introduces new requirements for the presentation of specific categories in the income statement and is expected to have minimal impact on the group's financial position[20] Market Performance - Revenue from aluminum products reached RMB 156,168,720 thousand in 2024, up from RMB 133,623,632 thousand in 2023, representing a growth of 16.8%[30] - Revenue from liquid aluminum alloy increased to RMB 95,169,828 thousand in 2024, compared to RMB 83,750,044 thousand in 2023, a rise of 13.5%[30] - The revenue from the Indian market surged to RMB 4,623,728 thousand in 2024, up from RMB 2,412,216 thousand in 2023, indicating an increase of 92.0%[30] Corporate Governance - The board consists of four executive directors, four non-executive directors, and four independent non-executive directors, ensuring a balanced governance structure[103] - The company has received multiple awards for corporate governance and sustainable development, including recognition as one of the "Most Admired Companies"[62] Employee and Operational Metrics - The group has a total of 51,320 employees as of December 31, 2024, an increase of 2,412 from the previous year, with total employee costs amounting to approximately RMB 5,557,824,000, a rise of about 10.4%[93] - The group reported a net cash inflow from operating activities of approximately RMB 33.98 billion for the year[80] Strategic Focus - The company is focusing on green development and has seen a steady increase in low-carbon aluminum production[60] - The company aims to leverage innovation and high-quality development to navigate global market changes and enhance competitiveness[65] - The company continues to focus on high-quality green development as a strategic guideline, aiming to enhance systematic and forward-looking planning for future industries[97] Shareholder Information - As of December 31, 2024, major shareholders include Shih Ping Trust Company holding 6,090,031,073 shares (64.27%) and Zhang Hongxia with 6,098,901,073 shares (64.36%) under a concerted action arrangement[111][116] - The company repurchased a total of 11,649,500 ordinary shares, representing approximately 0.12% of the total issued shares as of December 31, 2024[121] - The repurchase of shares reflects the board's confidence in the company's long-term strategy and growth potential[122]

Investment Rating - The report initiates coverage with a "Buy" rating for the company [8]. Core Views - The company has established itself as a global leader in the aluminum industry chain, effectively hedging against price fluctuations and ensuring long-term operational stability [2][4]. - The company benefits from a flexible management mechanism and leverages the advantages of hydropower resources in Yunnan to transfer part of its electrolytic aluminum capacity, further achieving cost leadership [5][32]. - The company has completed its peak capital expenditure phase, with an average dividend payout ratio of approximately 49.2% from 2019 to H1 2024, and an average dividend yield of 9.2% from 2019 to 2023, which is high within the metal cycle sector [7][32]. - Future aluminum prices are expected to rise, coupled with a tight supply-demand balance, leading to reduced price volatility and enhanced cash profit margins for the company, highlighting its long-term investment value [2][7]. Summary by Sections Company Overview - Founded in July 1994, the company has become a global leader in the aluminum industry chain, with a total alumina production capacity of 19.5 million tons, including 17.5 million tons domestically and 2 million tons in Indonesia [4][17]. - The electrolytic aluminum production capacity is approximately 6.46 million tons, with major production bases in Shandong and Yunnan [4][26]. Operational Strengths - The company has a comprehensive layout of the aluminum industry chain, including bauxite mining, alumina, electrolytic aluminum, and aluminum processing, which effectively mitigates price volatility risks [5][22]. - The company’s return on equity (ROE) is as high as 18.35% (annualized for H1 2024), placing it among the top in the aluminum industry [32]. Profitability and Market Dynamics - The company anticipates a net profit growth of approximately 95% year-on-year in 2024, reaching a historical high, driven by the overall price increase in the aluminum industry chain [4][18]. - The report highlights that the profit share of alumina is expected to dominate in 2024 due to supply constraints, while the profitability of electrolytic aluminum is projected to expand in 2025 as supply dynamics shift [6][53]. Dividend and Valuation - The company’s high dividend payout and the potential acquisition of core aluminum assets are expected to enhance its valuation, with a focus on long-term stable returns for investors [7][56]. - The report notes that the company is likely to benefit from the correction of the A/H share valuation gap following the acquisition of Hongtu Industrial, which has significant alumina and electrolytic aluminum production capacities [7][56].

Investment Rating - The report assigns a "Buy" rating to the company with a target price of HKD 16.8, indicating a potential upside of 31% from the current price of HKD 12.82 [2][72]. Core Insights - The company has demonstrated significant revenue growth due to high industry demand, with Shandong Hongqiao achieving a revenue of CNY 110.1 billion in the first three quarters, a year-on-year increase of 12.5%, and a net profit of CNY 15.8 billion, up 141% year-on-year [2][3]. - The integrated business model of the company provides a competitive advantage, ensuring stable supply and cost efficiency, with a self-sufficiency rate of 156% for alumina production [3][72]. - The report forecasts revenue for 2024-2026 to be CNY 150.3 billion, CNY 153.2 billion, and CNY 154.3 billion, respectively, with net profits projected at CNY 20.9 billion, CNY 22.7 billion, and CNY 23.6 billion [72]. Summary by Sections Financial Performance - The company reported a revenue of CNY 133.6 billion in 2023, with a projected increase to CNY 150.3 billion in 2024, reflecting a growth rate of 12% [5][72]. - The net profit for 2023 was CNY 11.5 billion, with expectations of CNY 22.8 billion in 2024, representing an 82% increase [5][72]. - Earnings per share (EPS) are forecasted to be CNY 2.20, CNY 2.40, and CNY 2.50 for 2024, 2025, and 2026, respectively [72]. Industry Context - The aluminum industry is experiencing high demand, with global electrolytic aluminum production growth slowing down, leading to a tight supply situation [24][29]. - The report highlights that China's aluminum production and consumption account for over half of the global totals, with a projected compound annual growth rate of 5.1% in demand from 2015 to 2024 [29][30]. Operational Efficiency - The company has optimized its cost structure, with a decrease in raw material prices contributing to improved profit margins [2][3]. - The report notes a steady decline in the company's debt ratio, which was 47% in 2023, indicating enhanced financial stability [18][20]. Dividend Policy - The company maintains a high dividend payout ratio, with forecasts of dividends per share at HKD 0.80, HKD 1.45, and HKD 1.58 for 2024, 2025, and 2026, respectively [70][72].

Group 1 - The core viewpoint of the article highlights that aluminum prices in China remain strong due to low inventory and robust consumption, with limited new production capacity expected this year [1] - The report indicates that the profit margins for aluminum smelting will be supported by these factors [1] - China Hongqiao's total debt level is expected to decrease significantly, and the recent stock buyback will help boost investor sentiment [1] Group 2 - The investment rating for China Hongqiao is maintained at "Buy," with a slight increase in the target price from HKD 14.8 to HKD 15 [1]

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The company is expected to benefit from rising aluminum product prices, with a projected net profit growth of 95% for the fiscal year 2024 compared to the previous year [6] - The increase in alumina prices and stable electrolytic aluminum prices are the main drivers for the significant improvement in the company's performance [6] - The company has a large-scale alumina production capacity, which supports its ongoing performance growth [6] Financial Performance Summary - The average price of alumina in Shandong reached 5,720.00 CNY/ton as of December 17, 2024, with an annual average of 3,963.50 CNY/ton, reflecting a year-on-year increase of 36.5% [6] - The average price of electrolytic aluminum was 19,750.00 CNY/ton as of December 18, 2024, with an annual average of 19,927.25 CNY/ton, showing a year-on-year increase of approximately 6.6% [6] - The company's net profit for 2024-2026 is projected to be 229 billion CNY, 256 billion CNY, and 286 billion CNY respectively [7] Market and Operational Insights - The alumina price is expected to remain strong, potentially driving industry capacity to continue being released in 2025 [7] - The operating rate of electrolytic aluminum in Yunnan has remained high, with a capacity utilization rate of 99.32% in June 2024 [7] - The company is actively expanding its green aluminum production, which is anticipated to provide a competitive advantage due to lower carbon emissions compared to traditional methods [7]

Investment Rating - The investment rating for China Hongqiao (01378) is "Buy" with a maintained rating for the next 6 months [1]. Core Views - The report highlights that the increase in alumina prices has led to enhanced profitability, with the company continuing to deliver strong performance [1]. - The subsidiary Shandong Hongqiao reported a revenue of 110.1 billion yuan for the first three quarters, a year-on-year increase of 12.5%, and a net profit attributable to shareholders of 15.8 billion yuan, up 141% year-on-year [1]. - The report anticipates that the company will achieve a net profit of 23 billion yuan and 24 billion yuan for the years 2024 and 2025, respectively, which is an upward revision from previous estimates [1]. Summary by Sections Financial Performance - Shandong Hongqiao's Q3 revenue reached 38 billion yuan, a year-on-year increase of 13.9%, with a net profit of 5.96 billion yuan, up 38% year-on-year and 9.4% quarter-on-quarter [1]. - The average price of aluminum ingots in Q3 was 19,546 yuan per ton, down 964 yuan from Q2, while the average price of alumina rose to 3,951 yuan per ton, an increase of 299 yuan from Q2 [1]. Cost Analysis - The average price of prebaked anodes in Q3 was 4,202 yuan per ton, slightly down from Q2's 4,334 yuan per ton, indicating a marginal decrease in costs [1]. - The average price of thermal coal remained stable at 848 yuan per ton in Q3, contributing to stable self-supplied power plant costs [1]. Profitability Outlook - The report indicates that the negative impact of falling aluminum prices is offset by rising alumina prices, along with positive contributions from reduced electricity costs during the wet season in Yunnan [1]. - The company recorded a 500 million yuan asset impairment loss in Q3, primarily related to power plant impairments, but operational profits are expected to be better without this impairment [1].

Investment Rating - The report maintains an "OUTPERFORM" rating for the company [2][8]. Core Views - The rise in alumina prices is expected to enhance profits, and the cost advantages of the integrated industrial chain are fully demonstrated [6][7][15]. - The company reported significant growth in revenue and net profit for its subsidiary, Shandong Hongqiao New Materials Co., Ltd., with a year-on-year revenue increase of 12.5% and a net profit increase of 141.4% for the first three quarters of 2024 [6][14]. Financial Summary - Revenue projections for 2024-2026 are RMB 149.585 billion, RMB 153.223 billion, and RMB 157.041 billion, respectively, with corresponding EPS of RMB 2.12, RMB 2.16, and RMB 2.30 [5][8][16]. - The gross profit margin (GPM) is expected to improve significantly, reaching 25.7% in 2024, while the return on equity (ROE) is projected to be 17.9% [5][8]. Price and Valuation - The current share price is HK$14.52, with a target price set at HK$18.96, indicating a potential upside of 25% [2][8]. - The company is valued at a price-to-earnings (P/E) ratio of 8x for 2025, reflecting a favorable valuation compared to peers [8][16]. Market Performance - The stock has shown strong absolute returns of 123.2% over the past 12 months, outperforming the MSCI China index by 106.6% [3][9].

Investment Rating - The investment rating for the company is "Buy" (maintained) [4][6]. Core Views - The company, Shandong Hongqiao, reported a net profit of 15.754 billion yuan for the first three quarters of 2024, representing a year-on-year increase of 141.43%. The company continues to build an integrated upstream and downstream industrial chain while actively integrating overseas bauxite resources [2][6]. - The company is expected to achieve net profits of 19.59 billion, 21.27 billion, and 22.59 billion yuan for 2024-2026, with year-on-year growth rates of 70.93%, 8.58%, and 6.22%, respectively. The corresponding EPS for these years is projected to be 2.07, 2.24, and 2.38 yuan, with current stock prices corresponding to P/E ratios of 7.02, 6.47, and 6.09 times [2][6]. Financial Performance Summary - For the first three quarters of 2024, Shandong Hongqiao achieved operating revenue of 110.068 billion yuan, a year-on-year increase of 12.47%, and a net profit of 15.754 billion yuan, a year-on-year increase of 141.43% [6][9]. - The average price of electrolytic aluminum increased by 5.9% year-on-year in the first three quarters of 2024, while the average price in Q3 increased by 3.9% year-on-year but decreased by 4.6% quarter-on-quarter. The prices of prebaked anodes and coal decreased by 22.9% and 10.6% year-on-year, respectively, in the first three quarters of 2024 [6][9]. - The theoretical profit of alumina in Q3 2024 was approximately 1,069 yuan/ton, an increase of 886 yuan/ton year-on-year and 188 yuan/ton quarter-on-quarter. The company has a total annual alumina production capacity of 19.5 million tons as of H1 2024 [6][9]. Earnings Forecast and Valuation - The company is projected to have operating revenues of 132.79 billion, 133.16 billion, and 135.58 billion yuan for 2024-2026, with year-on-year growth rates of -0.62%, +0.28%, and +1.82%, respectively. The expected EBITDA for these years is 37.147 billion, 38.880 billion, and 40.769 billion yuan [6][9]. - The company’s net profit is forecasted to be 19.59 billion, 21.27 billion, and 22.59 billion yuan for 2024-2026, with corresponding P/E ratios of 7.02, 6.47, and 6.09 times [6][9].

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The company has demonstrated significant performance in Q3, with its subsidiary Shandong Hongqiao achieving a revenue of 110.07 billion RMB, a year-on-year increase of 12.47%, and a net profit attributable to shareholders of 15.75 billion RMB, a year-on-year increase of 141.43% [2] - The price of alumina has shown continuous high growth, with an average price of 3,650.5 RMB/ton in the first three quarters of 2024, up 26.28% year-on-year, and reaching 5,118 RMB/ton by November 4, 2024, indicating a robust demand and tight supply [2] - The stable aluminum prices combined with cost optimization have led to continuous profit growth, with the average price of aluminum in the first three quarters being 19,700 RMB/ton, a 6.01% increase year-on-year [2] Financial Summary - The company’s projected net profits for 2024-2026 are 19.755 billion RMB, 21.125 billion RMB, and 22.606 billion RMB respectively, with corresponding P/E ratios of 5.8, 5.4, and 5.1 [2][3] - Revenue is expected to grow from 133.624 billion RMB in 2023 to 146.864 billion RMB in 2024, reflecting a 10% year-on-year increase [3] - The return on equity (ROE) is projected to improve from 12.42% in 2023 to 17.63% in 2024 [3][6] Cash Flow and Investment - Operating cash flow is expected to increase from 22.402 billion RMB in 2023 to 31.844 billion RMB in 2024 [4] - The company plans to relocate part of its aluminum electrolysis capacity to Yunnan, establishing a green aluminum innovation industrial park and lightweight materials base [2] Key Financial Ratios - The gross profit margin is projected to rise from 15.68% in 2023 to 23.39% in 2024 [6] - The net profit margin is expected to increase from 8.58% in 2023 to 13.45% in 2024 [6] - The debt-to-equity ratio is projected to decrease from 46.96% in 2023 to 40.82% in 2026, indicating improved financial stability [6]