20210823-招银国际-中国宏桥-01378.HK-Outstanding_1H21_profitability__aim_higher_with_support_from_good_pricing_in_2H21_5页_725kb

报告摘要

CMB International Securities | Equity Research | Company Update Summary

Core Content

This report provides an update on China Hongqiao (1378 HK), highlighting its strong performance in the first half of 2021 and the positive outlook for the second half and future years. The analysis is based on the company's financial results, earnings revisions, and market position, with a focus on its aluminum business and overall financial health.

Main Points

1H21 Performance

Net profit surged by 200.4% YoY to RMB8,143mn, exceeding expectations.
Revenue increased by 31.4% YoY to RMB52.5bn, driven by a 33.5% YoY rise in aluminum prices.
Gross profit margin (GPM) expanded by 13.8ppt to 30.0%, significantly higher than the estimated 27.7%.
Administrative expenses rose by 37.3% YoY, while finance costs declined by 14.5% YoY to RMB1.89bn.
Fair value loss of RMB1,166mn was recorded, mainly due to non-cash CB valuation impact.
Core earnings for 1H21 were estimated at RMB9.3bn, significantly beating expectations.

Earnings Outlook for 2H21E and Beyond

Aluminum ASP is expected to rise by 11.5% in 2H21E, reaching RMB19.36k/ton (VAT incl.).
Earnings for FY21-23E were revised upwards by 17.4–19.8%, based on improved aluminum pricing.
Net profit is forecasted at RMB19.0bn (FY21E), RMB20.4bn (FY22E), and RMB21.4bn (FY23E).
Dividend yield is expected to reach 11.7% (FY21E) and 12.6% (FY22E), with a 48% payout ratio.

Valuation and Investment View

Current price is HK$10.32, with a target price (TP) of HK$15.00, indicating a +45.3% upside.
P/E ratio for FY21E is 4.0x, and for FY22E is 3.8x, both attractive.
P/B ratio is 0.67x (FY21E) and 0.53x (FY23E), showing strong value.
Dividend yield is projected to increase from 11.7% to 13.3% by FY23E.
The report maintains a "BUY" rating, citing strong fundamentals and attractive valuation.

Debt and Financial Health

Short-term MTN reduced by ~RMB14.5bn in 1H21.
Revolving bond rate improved to 4.16%, indicating reduced borrowing costs.
Net gearing ratio dropped from 19.9% (FY21E) to 3.7% (FY22E), showing debt reduction.
Cash and cash equivalents increased to RMB71.1bn (FY23E), suggesting improved liquidity.

Shareholding and Market Performance

Hongqiao Holdings owns 66.62%, CITIC Group holds 9.62%, and freefloat is 23.66%.
12-month price performance was 132.8%, with a strong relative performance of 135.2%.
Share price has been volatile, with 1-month return of -0.8%, 3-month of -11.4%, and 6-month of +3.1%.

Key Information

Earnings Summary

FY	Revenue (RMB mn)	Net Income (RMB mn)	EPS (RMB)	Net gearing (%)
FY19A	84,179	6,095	0.71	56.5
FY20A	86,145	10,496	1.22	39.7
FY21E	109,768	19,099	2.12	19.9
FY22E	112,659	20,375	2.23	3.7
FY23E	114,443	21,448	2.35	N.C

Earnings Revision

Metric	Old (2021E)	New (2021E)	Change (%)
Aluminum sales volume (k tonnes)	5,095	5,095	0.0%
ASP (RMB/tonne, VAT incl.)	17,600	18,800	6.8%
Revenue (RMB bn)	102.92	109.77	6.6%
Net Income (RMB mn)	16,268	19,099	17.4%
EPS (RMB)	1.81	2.12	17.4%

Key Ratios

Ratio	FY19A	FY20A	FY21E	FY22E	FY23E
Gross profit margin (%)	19.6	22.5	31.5	31.0	31.9
Operating margin (%)	16.6	20.0	28.3	29.1	30.1
Net margin (%)	7.2	12.2	17.4	18.1	18.7
ROE (%)	9.6	14.7	21.9	20.6	19.4
ROA (%)	3.4	5.8	9.7	9.8	9.9
Current ratio (x)	1.43	1.33	1.83	2.24	3.18
P/E (x)	12.0	7.0	4.0	3.8	3.6
P/B (x)	0.87	0.80	0.67	0.59	0.53
Dividend Yield (%)	3.29	6.30	11.7	12.6	13.3

Conclusion

China Hongqiao (1378 HK) delivered outstanding profitability in 1H21, with stronger-than-expected net profit and GPM. The company is well-positioned to benefit from continued aluminum price increases, especially in 2H21E. With improved financial health, debt reduction, and attractive valuation metrics, the report maintains a "BUY" rating. The target price is HK$15.00, reflecting a +45.3% upside from the current price. The dividend yield is also attractive, with potential to reach 13.3% by FY23E.