According to the Zhitong Finance app, Cinda Securities published a research report stating that it maintains a “buy” rating on China Hongqiao (01378) and expects the company's net income attributable to the parent to be 19.081 billion yuan, 21.867 billion yuan, and 23.947 billion yuan in 2024-2026. The company announced its mid-term performance for 2024, with revenue of 73.592 billion yuan in the first half of 2024, an increase of 11.95%; net income attributable to the parent was 9.155 billion yuan, an increase of 272.66%; non-recurring net income attributable to the parent was 10.77 billion yuan, an increase of 352.68%; and EPS was 0.966 yuan, an increase of 273%. The company declared a dividend of HKD 0.59 per share for the first half of 2024, an increase of 73.5%.

Cinda Securities' main points are as follows:

The volume and price of aluminum products have risen, and performance has increased significantly.

The company achieved a non-recurring net income attributable to the parent of 10.77 billion yuan in the first half of the year. In terms of production volume in the first half of the year:

1) Electrolytic aluminum: The company's revenue from electrolytic aluminum in the first half of the year was 49.3 billion yuan, an increase of 7%, with a gross margin of 24.6%, an increase of 15.9 percentage points. The sales volume of electrolytic aluminum was about 2.837 million tons, an increase of 0.5%; the average selling price was about 17,379 yuan/ton, excluding taxes, an increase of 6.7%. The cost of purchasing raw materials such as coal and pre-baked anodes decreased, and the price of thermal coal and pre-baked anodes in the first half of the year decreased by 15% and 27% respectively.

2) Alumina: The company's revenue from alumina in the first half of the year was 16.2 billion yuan, an increase of 20%, with a gross margin of 25.4%, an increase of 16.5 percentage points. The sales volume of alumina was about 5.507 million tons, an increase of 2.4%; the average selling price was about 2,942 yuan/ton, excluding taxes, an increase of 16.9%.

3) Aluminum processing: The company's aluminum processing achieved revenue of 7.6 billion yuan in the first half of the year, an increase of 34% compared to the same period last year; the gross margin was 21.0%, an increase of 7.4 percentage points; the sales volume of aluminum processing was approximately 0.379 million tons, an increase of 35.9%; the average selling price was approximately 20,027 yuan per ton excluding taxes.

Continuously high dividend payout ratio.

In 2024, the company will pay a dividend of HK$0.59 per share, a year-on-year increase of 73.5%. As of the closing price on August 16, 2024, the dividend yield was 5.72%, and the dividend payout ratio was 61.07%. Since its listing in 2011, the company has implemented 13 dividend distributions, with a cumulative net income of 96.156 billion yuan and a cumulative cash dividend of 27.383 billion yuan, with an average dividend payout ratio of 28.48%. The company's average dividend payout ratio ranks among the top in the industry, with stable and strong performance growth and a strong safety margin.

Integrated leader in the aluminum industry chain, expected to enjoy high-profit elasticity.

As of March 2024, the company's Guinea project has maintained a stable annual production capacity of approximately 50 million tons of bauxite and a total alumina production capacity of 19.5 million tons per year (including 17.5 million tons per year of domestic alumina production capacity and 2 million tons per year of Indonesia alumina production capacity). The company's current self-sufficiency rate of alumina is 100%, highlighting the advantages of integration. The development of the Guinea bauxite project guarantees the company's supply of bauxite raw materials, and the company has also developed the supply of Australian bauxite, diversifying its sources of ore supply to further ensure the stability of the company's raw materials. The total aluminum electrolytic production capacity is 6.46 million tons per year, of which the company plans to transfer a total of 3.96 million tons per year to Yunnan, which is expected to reduce the comprehensive electricity cost of the company's total production capacity; the deep processing capacity of aluminum alloy is 1.17 million tons per year.