Guolian Securities released a research report stating that China Hongqiao (01378) is expected to achieve significant growth in performance in the first half of 2024, highlighting the advantages of aluminum industry chain integration. The company's performance for the full year of 2024 is expected to have high elasticity and maintains a "buy" rating. It is projected that the company's operating revenue for 2024-2026 will be 132.79/133.16/135.58 billion yuan, with year-on-year changes of -0.62%/+0.28%/+1.82%. 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 rates of 70.93%/8.58%/6.22%. The EPS is projected to be 2.07/2.24/2.38 yuan.

China Hongqiao achieved operating revenue of 73.592 billion yuan in the first half of 2024, a year-on-year growth of 11.95%. The net income attributable to the parent company was 9.155 billion yuan, a year-on-year growth of 272.66%. The basic earnings per share was 0.966 yuan. Guolian Securities pointed out that the company's revenue growth comes from price increases and increased sales volume, while profit growth comes from the decrease in electrolytic aluminum costs and management expenses.

Guolian Securities' main points are as follows:

Revenue growth comes from price increases and increased sales volume.

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

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

In the first half of 2024, the company achieved a gross margin of 24.2% and a year-on-year increase of 15.2 percentage points. The decline in raw material prices, as the coal and anode needed for the company's electrolytic aluminum production are externally purchased, helped the gross margin to rebound.

In terms of product gross margin, in the first half of 2024, the company achieved gross margins of 24.6%/25.4%/21.0% for electrolytic aluminum/alumina/aluminum alloy processing products, with year-on-year increases of 16.0/16.5/7.4 percentage points. In terms of expense ratio, the company's sales/management/financial expense ratios in the first half of 2024 were 0.50%/3.33%/2.12%, with year-on-year changes of +0.04/-0.94/-0.12 percentage points.

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 including taxes were 3855/875 yuan/ton respectively, a year-on-year decrease of 27.2%/14.4%; the average price of alumina including taxes was 3504 yuan/ton, an increase of 21.1% year-on-year. The company adheres to the construction of an integrated upstream and downstream industrial chain, while actively integrating overseas bauxite resources; benefiting from the continuous improvement of upstream alumina business, the company has achieved increased profits in alumina while ensuring the stability of its own costs.