Futu Securities has released a research report stating that the performance of Chinahongqiao (01378) in the first half of 2024 has grown significantly, highlighting the advantages of aluminum industry chain integration. The company's full-year performance in 2024 is expected to be highly elastic, maintaining a 'buy' rating for the company. The projected revenue for the company in 2024-2026 is 132.79/133.16/135.58 billion yuan, with year-on-year changes of -0.62%/+0.28%/+1.82% respectively. The net income attributable to the parent company is expected to be 19.59/21.27/22.59 billion yuan, with year-on-year growth of 70.93%/8.58%/6.22% respectively, and the EPS is expected to be 2.07/2.24/2.38 yuan.

Chinahongqiao achieved revenue of 73.592 billion yuan in the first half of 2024, representing an 11.95% year-on-year growth, while the net income attributable to the parent company was 9.155 billion yuan, a growth of 272.66% year-on-year. The basic EPS is 0.966 yuan. Guolian Securities pointed out that the revenue growth of the company comes from price increases and sales volume growth, while profit growth comes from the decrease in the cost of electrolytic aluminum and the reduction in operating expenses.

Guolian Securities' main points are as follows:

Revenue growth comes from price increases and increased sales volume.

In terms of product breakdown, in 2024 H1, the company achieved revenue of 49.31/16.2/7.58 billion yuan for electrolytic aluminum/alumina/alloy processing products, representing year-on-year growth of 7.2%/19.7%/34.3% respectively. Looking at product sales volume, in 2024 H1, the company achieved sales volumes of 283.7/5.507/0.379 million tons for electrolytic aluminum/alumina/alloy processing products, with year-on-year growth of 0.5%/2.4%/35.9% respectively. The average selling prices for the company's electrolytic aluminum/alumina/alloy processing products (excluding tax) in 2024 H1 were 17,379/2,942/20,027 yuan/ton, representing year-on-year changes of +6.7%/+16.9%/-1.2% respectively.

Profit growth comes from the decrease in electrolytic aluminum costs and management expenses.

In H1 2024, the company achieved a sales gross margin of 24.2%, a year-on-year increase of 15.2 pct. The decline in raw material prices, as well as the need to purchase coal and anodes for the company's aluminum electrolysis production, helped to boost the gross margin. In terms of product gross margin, in H1 2024, the company achieved gross margins of 24.6% for aluminum electrolysis/alumina/alloy processing products, with respective year-on-year increases of 16.0/16.5/7.4 pct. As for expense ratios, in H1 2024, the company's sales/management/financial expense ratios were 0.50%/3.33%/2.12%, with respective year-on-year increases of +0.04/-0.94/-0.12 pct.

The integrated advantage of the aluminum industry chain is highlighted, and the full-year performance for 2024 is expected to have high elasticity.

In H1 2024, the company's main costs for pre-baked anodes/thermal coal had tax-inclusive average prices of 3,855/875 yuan per ton, with respective year-on-year decreases of 27.2%/14.4%. The tax-inclusive average price for alumina was 3,504 yuan per ton, with a year-on-year increase of 21.1%. The company actively promotes the construction of an integrated upstream and downstream industry chain and actively integrates overseas bauxite resources. Benefiting from the continuous improvement of the upstream alumina business, the company has achieved increased profits in alumina while ensuring the stability of its own costs.