Investment Rating - The report maintains an "Outperform" rating for China Hongqiao (1378 HK) with a target price of HK$12.80, indicating a potential upside of 31% from the current price [38]. Core Viewpoints - The report argues that the recent price consolidation of aluminum is overdone, with an 18% decline in price since late May attributed to China's economic slowdown and seasonal factors. However, the global spot market remains tight, as evidenced by a significant increase in the Japanese ingot premium [1][9]. - Solid demand for aluminum persists, particularly from sectors such as electric vehicles (EVs), power grids, and solar power, while supply faces structural risks due to capacity constraints in China and limited growth in overseas production [2][10]. - The report projects a positive outlook for aluminum prices, forecasting a 7% growth in 2024 and an 8% growth in 2025, with prices expected to reach US$2,415/t and US$2,620/t respectively [11][19]. Summary by Sections Aluminum Price Trends - The LME aluminum price has seen an 18% decline since late May, but the report suggests this is excessive given the tight supply conditions in the global market [9][10]. - The report notes that the aluminum ingot premium has risen significantly, indicating ongoing supply tightness [1][9]. Demand and Supply Dynamics - China's aluminum demand remains robust, with a 6.1% YoY increase in apparent consumption in 1H24, driven by sectors such as transportation and power [19][21]. - Supply constraints are highlighted, with China's total aluminum production capacity capped and utilization rates reaching record highs, limiting future growth [18][17]. Company-Specific Insights - China Hongqiao is identified as a cost-competitive player in the aluminum sector, benefiting from its vertical integration and access to low-cost hydropower [38]. - The report emphasizes Hongqiao's strong balance sheet and higher profitability forecasts compared to its peers, making it a preferred investment choice [38][37].

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Consumer Staples | 12 August 2024 Anita Chu (852) 3911 8252 anitachu@ccbintl.com Anita Du (852) 3911 8013 anitadu@ccbintl.com downgrade from Outperform) Trading data 52-week rangeHK$12.56-27.75 Market capital (H-share, m)53.599 Shares outstanding (m)3.935 Free float (%)75 273M average daily T/O (m share) 3M average daily T/O (US$ m)50 0Expected 12-month return (%) Source: Bloomberg, CCBIS estimates Share price vs HSCEI HKS 35 30 25 20 15 Source: Bloomberg Expect a weak 1H24F ▶ OPM expansion target is hardly ...