Summary of the Conference Call on the Aluminum Industry Industry Overview - The conference call focuses on the aluminum processing industry, particularly the downstream sectors and their performance amid current market conditions [1][2][3]. Key Points and Arguments Market Conditions - Aluminum processing fees have continued to decline, with July seeing a drop of over 30% in East and South China, leading to a capacity utilization rate of 43.75% [1][2]. - Despite the low demand season, August orders stabilized, and inventory levels decreased, leading to optimistic expectations for the "Golden September and Silver October" period, with a slight increase in capacity utilization expected in September [1][3]. Production Capacity and Utilization - The total production capacity of aluminum profile enterprises exceeds 10 million tons, with an operational rate around 50% [1][3]. - The construction profile segment has been significantly impacted by the sluggish real estate market, with its share dropping from over 70% in 2019 to 45.7% in 2024 [1][3]. Real Estate Market Impact - From January to July, real estate development investment decreased by 12% year-on-year, with new construction area down by 19.4% and completion area down by 16.5%, resulting in a reduction of aluminum consumption in the real estate sector by 353,000 tons [1][3]. Export Opportunities - To cope with domestic market challenges, some aluminum profile enterprises are actively expanding exports, with coastal factories reporting an export proportion of over 50% [1][3]. - However, international trade frictions and policies regarding green aluminum pose challenges to this strategy [1][4]. Demand from New Energy Sectors - Demand for aluminum in the new energy sector is growing significantly, particularly in photovoltaic and new energy vehicle (NEV) fields, with a year-on-year increase of over 99% in new photovoltaic installations and over 38% in NEV production and sales from January to July [1][6]. Challenges in New Energy Market - Aluminum processing enterprises face challenges such as the cancellation of photovoltaic subsidies, rapid domestic capacity expansion, and high collaboration thresholds with major automotive companies [1][7]. Specific Market Segments - The aluminum plate and foil market is experiencing pressure due to the cancellation of export tax rebates and international trade frictions, with a cumulative export volume decrease of 9.5% from January to July [1][8][9]. - The aluminum rod market is expected to see demand driven by electric grid investments, with positive expectations for the third and fourth quarters [1][12][13]. Future Outlook - The overall demand growth for the aluminum industry is expected to remain steady but varies significantly across different segments, with construction profiles likely to see negative growth while new energy sectors may maintain double-digit growth [1][21][22]. - The aluminum processing sector is anticipated to face ongoing challenges, including supply-demand imbalances and low-price competition, which may hinder profit recovery [1][24]. Additional Important Insights - The aluminum processing industry is characterized by a trend of larger enterprises increasing their melting capacity and sourcing recycled aluminum, while smaller enterprises focus on optimizing equipment and utilizing clean energy [1][5]. - The market for recycled aluminum ingots is expected to see a gradual price increase due to tight supply and supportive policies, with a projected price of around 20,000 yuan per ton [1][19]. - The overall sentiment among processing enterprises remains cautious, with many adopting a price-for-volume strategy to navigate the oversupply situation [1][24]. This summary encapsulates the key insights and data points from the conference call, providing a comprehensive overview of the current state and future outlook of the aluminum industry.

Core Viewpoint - Industrial Securities maintains a "Buy" rating for China Hongqiao (01378), highlighting strong downstream demand for aluminum, particularly in new energy and ultra-high voltage applications, despite a slight decline in alumina prices [1][2] Group 1: Aluminum Market Dynamics - Domestic electrolytic aluminum supply is nearing capacity limits, while demand remains robust, driven by solar energy installations and aluminum exports, leading to a resilient demand for electrolytic aluminum [1] - The average selling price of electrolytic aluminum in H1 2025 was 17,853 RMB per ton, reflecting a quarter-on-quarter increase of 146 RMB and a year-on-year increase of 474 RMB [1] - Electrolytic aluminum sales volume increased by 2.4% year-on-year to 2.91 million tons, while aluminum products and aluminum alloy processing products sales rose by 2.5% year-on-year to 3.3 million tons [1] Group 2: Alumina Market Insights - Alumina prices have declined from the high levels seen in H2 2024, with the external sales price per ton in H1 2025 decreasing by 664 RMB to 3,243 RMB, but still showing a year-on-year increase of 301 RMB [2] - External sales volume of alumina increased by 860,000 tons year-on-year to 6.37 million tons, with gross profit per ton rising by 185 RMB to 933 RMB [2] Group 3: Financial Performance and Capital Expenditure - China Hongqiao's net profit attributable to shareholders for H1 2025 was 12.4 billion RMB, an increase of 3.2 billion RMB year-on-year, but a decrease of 900 million RMB quarter-on-quarter [1] - The company maintained high capital expenditures of 9.89 billion RMB in H1 2025, focusing on capacity relocation in Yunnan, solar projects in Yunnan, and lightweight projects in Shandong [2] - The company has increased interest-bearing liabilities to 75.5 billion RMB, up 4.7 billion RMB quarter-on-quarter, while managing to reduce financing costs [2] Group 4: Shareholder Returns - China Hongqiao has canceled its interim dividend but is expected to maintain a full-year dividend payout ratio of 63% for 2025, similar to 2024 [2] - The company has announced a share buyback plan of no less than 3 billion HKD, having already repurchased approximately 2.6 billion HKD worth of shares, representing 2% of the total shares outstanding as of the end of 2024 [2]

Group 1 - The core viewpoint is that China Hongqiao (01378) is rated as a "buy" by Industrial Securities, with strong demand for aluminum driven by sectors like new energy and ultra-high voltage applications, despite a slight decline in alumina prices [1] - Domestic electrolytic aluminum supply is nearing capacity limits, while downstream demand remains robust, particularly in the photovoltaic and aluminum export sectors, supporting resilient demand for electrolytic aluminum [1] - The average selling price of electrolytic aluminum in H1 2025 was 17,853 RMB per ton, showing a quarter-on-quarter increase of 146 RMB and a year-on-year increase of 474 RMB, with sales volume up 2.4% year-on-year to 2.91 million tons [1] Group 2 - In terms of alumina, prices have declined but profitability has improved, with external sales prices for alumina in H1 2025 decreasing by 664 RMB to 3,243 RMB per ton, while sales volume increased by 860,000 tons year-on-year to 6.37 million tons [2] - The company has maintained strict cost control, with total expenses in H1 2025 amounting to 3.96 billion RMB, a decrease of 420 million RMB year-on-year, while interest-bearing debt increased by 4.7 billion RMB to 75.5 billion RMB [2] - China Hongqiao has announced a share buyback plan of no less than 3 billion HKD, having already repurchased approximately 2.6 billion HKD worth of shares, representing 2% of the total shares outstanding as of the end of 2024 [2]