Investment Rating - The report maintains a "Buy" rating for China Hongqiao (01378.HK) [6] Core Views - In 2025, China Hongqiao achieved a revenue of 162.35 billion RMB, a year-on-year increase of 4%, and a net profit of 22.64 billion RMB, a year-on-year increase of 1% [1] - The company experienced a decline in revenue and net profit in the second half of 2025, primarily due to a significant drop in alumina prices and reduced aluminum processing sales [1] - The company has made significant advancements in new materials, technologies, and processes, solidifying its leading position in the global aluminum alloy materials and green manufacturing sectors [3] - The cash dividend for 2025 was 14.475 billion RMB, with a payout ratio of 64%, reflecting the company's operational confidence [3] Financial Summary - Revenue for 2025 was 162.35 billion RMB, with a growth rate of 4% year-on-year [5] - The net profit for 2025 was 22.64 billion RMB, with a growth rate of 1.2% year-on-year [5] - The estimated net profit for 2026-2028 is projected to be 32.27 billion RMB, 36.55 billion RMB, and 40.68 billion RMB, respectively, with corresponding P/E ratios of 9.4, 8.3, and 7.4 [4][5] - The company’s EPS for 2025 is 2.27 RMB per share, with a projected increase to 3.23 RMB per share in 2026 [5] Production and Pricing - In 2025, the company sold 13.397 million tons of alumina, a year-on-year increase of 22.7%, while aluminum sales were 5.824 million tons, a slight decrease of 0.2% [1][2] - The average selling price of electrolytic aluminum (excluding tax) in 2025 was 18,216 RMB per ton, a year-on-year increase of 4%, while the price of alumina was 2,899 RMB per ton, a year-on-year decrease of 15% [2] - The gross profit margin for alumina in 2025 was 643 RMB per ton, a decrease of 47% year-on-year, while the gross profit margin for electrolytic aluminum was 5,183 RMB per ton, an increase of 20% year-on-year [2]

Core Viewpoint - The report from Guosheng Securities indicates that capacity realization and cost reduction are key competitive factors at the current stage, with China Hongqiao (01378) expected to achieve leapfrog growth through overseas expansion and deep empowerment of upstream and downstream operations [1] Group 1: Financial Performance - In the first three quarters of 2025, Shandong Hongqiao achieved revenue of 1169.3 billion yuan, a year-on-year increase of 6%, and a net profit of 193.7 billion yuan, a year-on-year increase of 23% [2] - For Q3 2025, the company reported revenues of 402 billion yuan, 380 billion yuan, and 387 billion yuan for Q1, Q2, and Q3 respectively, with year-on-year growth rates of 16%, 2%, and 2% [2] - The net profits for Q3 2025 were 64 billion yuan, 61 billion yuan, and 69 billion yuan for Q1, Q2, and Q3 respectively, with year-on-year growth rates of 47%, 11%, and 18% [2] Group 2: Aluminum Price and Profitability - The average price of electrolytic aluminum in Q3 was 20,711 yuan per ton, reflecting a year-on-year increase of 6% and a quarter-on-quarter increase of 3% [3] - The cost of electrolytic aluminum in Shandong was reported at 15,299 yuan per ton, while in Yunnan it was 15,445 yuan per ton [3] - The industry profit for electrolytic aluminum was 4,125 yuan per ton in Q3, showing a year-on-year increase of 128% and a quarter-on-quarter increase of 22% [3] Group 3: Capacity Transfer Plan - China Hongqiao plans to transfer 44.8 thousand tons, 24.1 thousand tons, and 83.1 thousand tons of capacity from Shandong to Yunnan in 2025, 2026, and 2027 respectively [4] - After 2028, the company will maintain stable total electrolytic aluminum capacity in both Shandong and Yunnan without further adjustments [4] Group 4: Financing Activities - The company issued a 300 million USD convertible bond maturing in 2030, with an initial conversion price of 20.88 HKD per share [5] - The net proceeds from the bond issuance are approximately 290 million USD, intended for refinancing existing offshore debt and general corporate purposes [5]