Core Viewpoint - DBS Bank maintains a "Buy" rating for China Hongqiao (01378) after a strong performance in the first half of 2025, raising the 12-month target price from HKD 22 to HKD 29, supported by an optimistic aluminum price outlook [1] Financial Performance - In the first half of 2025, China Hongqiao's revenue increased to RMB 81 billion, a year-on-year growth of 10.1%, driven by higher average selling prices (ASP) of alumina and aluminum products, as well as increased sales volume [1] - The company's gross margin improved by 1.5 percentage points to 25.7%, while net attributable profit rose by 35% to RMB 12.36 billion, with a net profit margin increase of 3 percentage points to 17% [1][2] Financial Health - China Hongqiao's financial condition is improving, with interest coverage ratio significantly rising to 17.6 times due to optimized debt structure and improved interest rates [2] - Although no interim dividend was declared for the first half of 2025, management expects the annual dividend payout ratio to remain stable at 63% for the fiscal year 2024, leading to an implied dividend yield of 7% based on the projected earnings per share of HKD 2.60 for fiscal year 2025 [2] Market Outlook - DBS Bank anticipates strong aluminum prices to continue through 2026-2027, highlighting China Hongqiao's competitive advantages [2] - Management projects the average selling price for electrolytic aluminum in 2025 to be between RMB 20,600 and RMB 21,300 per ton, and for alumina between RMB 3,200 and RMB 3,300 per ton, indicating a robust price outlook [2] - Global aluminum demand is expected to grow by 3.1% in 2025, outpacing supply growth of 1.8% [2] Competitive Position - Under China's "anti-involution" guidelines, supply control is expected to strengthen, benefiting leading companies like China Hongqiao from rising average prices and market consolidation [3] - China Hongqiao aims to complete the transfer of approximately 2.2 million tons of capacity to Yunnan by the end of fiscal year 2025, representing 34% of total capacity, enhancing its production cost advantages through an integrated supply chain and increased use of green power [3]
星展银行：上调中国宏桥(01378)目标价至29港元 上半年业绩超预期、铝价前景乐观