GUOTAI JUNAN International has issued a research report covering CHINAHONGQIAO (01378), maintaining a "Buy" rating on the stock with a target price of HK$43.20. The core rationale is based on the company's further strengthened overall balance sheet and the sustainability of its high dividend payouts. The institution highlights three key factors: firstly, the international aluminum price outlook remains robust, with the full-year 2026 average selling price for aluminum products projected to be approximately RMB 23,000 per tonne; secondly, effective control over raw material costs; and thirdly, the continuation of the high dividend policy. Based on an 11.5x forecasted 2026 price-to-earnings ratio, analysts set the target price at HK$43.20. GUOTAI JUNAN International has maintained its 2026/2027 forecasts and introduced new 2028 forecasts and a valuation table, with corresponding earnings per share of RMB 3.443, RMB 3.546, and RMB 3.617 for 2026, 2027, and 2028, respectively.
Regarding operational performance, the institution views revenue as largely meeting expectations, while profits were slightly below expectations. CHINAHONGQIAO's 2025 revenue reached approximately RMB 162.4 billion, a 4.0% year-on-year increase, generally aligning with market consensus. Net profit was about RMB 22.6 billion, up 1.2% year-on-year but slightly below expectations, primarily due to two factors: margin pressure and a non-cash fair value loss of approximately RMB 3.8 billion related to convertible bonds. Excluding this fair value loss, the report indicates the company's underlying net profit would have exceeded RMB 26 billion. The board has recommended a final dividend of HK$1.65 per share, corresponding to a payout ratio of about 65%, which is a key basis for the report's high dividend sustainability argument.
The research report places significant emphasis on the improvement in financial quality. CHINAHONGQIAO's cash balance at the end of 2025 stood at RMB 51.2 billion, with operating cash inflow reaching RMB 39.0 billion, a 14.8% year-on-year increase. Concurrently, the asset-liability ratio decreased to 42.2%, down 6.0 percentage points from the end of the previous year. Against a backdrop of reduced capital expenditure and improved leverage, analysts judge that the company not only has the capacity to sustain its high dividend policy but also possesses room for continued share buybacks. The report discloses that the company's cumulative buyback amount for 2025 reached HK$5.58 billion. In essence, this is not merely a cyclical profit improvement but a simultaneous optimization of cash flow, dividend capability, and capital structure, which is why the report positions "sustainability of high dividends" as a core investment thesis.
From a medium-term growth perspective, the report believes CHINAHONGQIAO's future earnings are not solely reliant on aluminum prices but are also supported by the gradual commissioning of new projects. Key projects include the world's first NEUI600+ super electrolyzer production line, a 250,000-ton high-precision aluminum alloy slab and ingot project, and the Simandou iron ore project, which commenced operations in November 2025. These projects are expected to further strengthen the company's "green aluminum" framework, resource attributes, and profitability. GUOTAI JUNAN International's latest forecast table shows CHINAHONGQIAO's revenue for 2026/2027/2028 projected at RMB 180.301 billion, RMB 182.948 billion, and RMB 184.416 billion, respectively, with net profits of RMB 34.201 billion, RMB 35.216 billion, and RMB 35.924 billion, respectively.
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