20260512-招银国际-宏桥控股-002379.SZ-High_earnings_sensitivity_to_aluminium_price,_high_dividend_payout_initiate_with_BUY_10页_915kb

Hongqiao Holdings (002379 CH) Summary

Core Content

Hongqiao Holdings is a major subsidiary of China Hongqiao (1378 HK), with China Hongqiao holding 89% of its equity following a backdoor listing completed in December 2025. The company is involved in the full cycle of aluminium production, including alumina refining, primary aluminium smelting, and aluminium product processing. The analysis highlights the company's high earnings sensitivity to aluminium prices and a strong potential for dividend payouts, leading to an initiation of a "BUY" recommendation with a target price of RMB29.00, based on a 13.2x 2026E P/E ratio, which represents a 20% premium over the target multiple of 11x for China Hongqiao.

Main Points

• Earnings Sensitivity: Hongqiao Holdings' earnings are highly sensitive to aluminium price changes, with a projected ~3.3% increase for every 1% rise in aluminium prices in 2026E, which is higher than China Hongqiao's ~2.3%.
• Dividend Payout Ratio: The company has a high potential dividend payout ratio of 75% in the model assumption, aligning with China Hongqiao's historical dividend payout of over 66%.
• Business Expansion: The backdoor listing significantly expanded Hongqiao Holdings' business scope to include a fully integrated operation, and increased China Hongqiao's stake to 89%.
• Capacity Shift: The company is relocating production capacity from Shandong to Yunnan to benefit from lower electricity tariffs and green energy.
• Valuation: The target price of RMB29.00 is based on a 13.2x 2026E P/E ratio, which is a 20% premium to the target multiple for China Hongqiao, in line with the current A/H premium of Chalco.

Key Information

• Alumina Refinery: Annual capacity of ~19mt, located in Shandong, and sufficient to meet smelting needs. Some alumina is sourced externally for Yunnan smelters.
• Primary Aluminium Smelting: Annual capacity of ~6.46mt, with a planned increase to 3mt in Yunnan by end-2027.
• Aluminium Product Processing: Annual capacity of 1.72mt, with new additions in 2025.
• Electricity Cost: Slightly higher than China Hongqiao due to no captive power plants. The average electricity tariff is expected to decline as the company shifts more production to Yunnan.
• Price Forecast: The analysis forecasts a 15% YoY increase in aluminium price and a 13% YoY decline in alumina price for 2026E, with minor declines in 2027E.
• Financial Performance: Revenue is projected to grow from RMB150,336 million in FY24A to RMB173,916 million in FY26E, with adjusted net profit expected to rise from RMB17,228 million to RMB28,208 million.
• Gross Margin: Blended gross margin is expected to increase from 19.4% in FY24A to 23.9% in FY26E, and decline to 18.7% in FY28E.
• Dividend Forecast: Gross dividends are expected to increase from RMB3,258 million in FY25A to RMB21,156 million in FY26E, reflecting the high payout ratio.
• Key Risks: The main risks include unexpected removal of capacity caps in China, faster-than-expected overseas capacity expansion, global economic slowdown, and sharp increases in input costs such as bauxite and coal.

Shareholding Structure

• Pre-transaction: China Hongqiao held 22.98%, while other shareholders held 77.02%.
• Post-transaction: China Hongqiao holds 88.99%, with the rest of the shares held by other shareholders.

Financial Summary

• Revenue: Expected to increase from RMB150,336 million in FY24A to RMB174,824 million in FY28E.
• Adjusted Net Profit: Projected to rise from RMB17,228 million in FY24A to RMB24,517 million in FY28E.
• EBITDA: Expected to grow from RMB29,351 million in FY24A to RMB39,699 million in FY28E.
• Net Interest Income/(Expense): Projected to improve from a net expense of RMB1,797 million in FY24A to a net income of RMB856 million in FY28E.
• Total Assets: Expected to increase from RMB108,026 million in FY24A to RMB151,296 million in FY28E.
• Total Liabilities: Projected to increase from RMB63,327 million in FY24A to RMB66,917 million in FY28E.
• Total Shareholders' Equity: Expected to rise from RMB42,690 million in FY24A to RMB80,442 million in FY28E.

Peer Valuation

• P/E Ratio: Hongqiao Holdings has a higher P/E ratio compared to peers, with a target of 10.7x for 2026E and 11.5x for 2027E.
• P/B Ratio: The P/B ratio is expected to decrease from 4.3x in 2026E to 3.8x in 2028E.
• Yield: The dividend yield is expected to increase from 1.1% in 2025 to 7.0% in 2026E, and gradually decline to 6.1% in 2028E.

Conclusion

Hongqiao Holdings is positioned to benefit from the anticipated global aluminium supply deficit, with a strong earnings sensitivity and high dividend potential. Despite the risks, the company's strategic shift to Yunnan for lower electricity costs and its integrated business model support the "BUY" recommendation.