Core Viewpoint - Jefferies maintains a "Buy" rating for China Hongqiao (01378) and raises the target price from HKD 26.90 to HKD 34.1, citing strong performance from its core subsidiary and favorable supply-demand dynamics in the aluminum industry [1][2]. Financial Performance - China Hongqiao's core subsidiary, Shandong Hongqiao, achieved a net profit of RMB 19.4 billion for the first three quarters of 2025, a year-on-year increase of 23%. The net profit for Q3 2025 alone reached RMB 6.9 billion, reflecting a quarter-on-quarter growth of 14.4% and a year-on-year growth of 17.6% [1]. - The increase in aluminum and alumina prices contributed approximately RMB 500-600 million to the net profit in Q3, while cost savings from reduced electricity prices during the rainy season in Yunnan added around RMB 300 million [1]. Market Conditions - Since Q3 2025, aluminum prices have exceeded expectations due to improved macroeconomic conditions and industry supply-demand optimization, with current spot prices surpassing RMB 21,000 per ton [2]. - Despite some price corrections in alumina and rising coal and electricity costs, if aluminum prices remain stable, the operating profit for China Hongqiao in Q4 is expected to match that of Q3 [2]. Debt and Valuation - The impact of convertible bond fair value changes on net profit is expected to decrease significantly in the second half of 2025, as the majority of the bonds issued in 2021 have been converted [2]. - Jefferies has raised its net profit forecasts for China Hongqiao for 2025 and 2026 by 4% and 8%, respectively, to RMB 25.9 billion and RMB 26.7 billion, based on aluminum price assumptions of RMB 20,600 and RMB 20,800 per ton [2]. Dividend and Shareholder Returns - Jefferies sets a target price based on a projected price-to-earnings ratio of 11 times for 2026, with a corresponding dividend yield of nearly 6% based on a 63% payout ratio for 2024 [3]. - The company continues to generate strong cash flow and provides substantial returns to shareholders through stable dividends (over 60% payout ratio) and share buybacks, which supports the "Buy" rating [3].
杰富瑞：中国宏桥(01378)三季度业绩稳健 上调目标价至34.1港元