CHINA HONGQIAO(01378.HK)：ACCELERATED INNOVATION AND GREENNESS DEVELOPMENT-格隆汇

机构：国泰君安国际
研究员：Gary Wong

　　We maintain "Buy" and raise the TP to HK$14.50. We revise up the EPS forecasts for China Hongqiao (the "Company") for 2024/ 2025/ 2026 by 5.1%/ 17.2%/ 23.2% to RMB1.779/ RMB1.925/ RMB2.020, respectively. We raise the target price to HK$14.50, representing 7.5x/ 7.0x/ 6.6x 2024/ 2025/ 2026 PER.
　　1H2024 shareholders’ net profit increased 272.7% YoY to RMB9.2 billion. Total revenue increased 12.0% YoY to RMB73.6 billion. During the period, sales volume of aluminum alloy products, aluminum fabrication products, and alumina products were 2.837 mn tons (+0.5%), 0.379 mn tons (+35.9%) and 5.507 mn tons (+2.4%), respectively. ASP (excluding VAT) were RMB17,379/ton (+6.7%), RMB20,027/ton (-1.2%), and RMB2,942/ton (+16.9%), respectively. GP/ton were RMB4,279 (+203.0%), RMB4,212 (+52.4%) and RMB748 (+232.7%), respectively. Overall gross margin increased 15.2 ppts YoY to 24.2%, mainly driven by the substantial increase in gross profit for aluminum alloy products due to the increase in sales price and decrease in raw materials prices.
　　Upstream and downstream integration on a global perspective, and optimization of diversified energy structure. The Company’s annual production capacity for alumina products reached 17.5 million tons in China and 2 million tons in Indonesia. Annual production capacity of midstream aluminum alloy reached about 6.46 million tons. Annual production capacity of downstream aluminum fabrication was 493,000 tons. At the same time, the Company actively expanded the proportion of clean energy and strengthened the application of hydropower and photovoltaic power generation, thereby promoting high quality productive forces. The proportion of aluminum products used in China’s construction sector decreased from 34.9% to 31.2% in 1H2024 due to the decline in demand in the real estate market. However, the proportion used in the transportation sector and electronic & power sector increased from 11.9% to 12.8% and significantly from 15.8% to 18.4%, respectively, as the rapid development of new energy vehicles and the photovoltaic industry have driven the growth of demand for lightweight, high-strength and good thermal conductivity aluminum products.
　　Catalysts: 1) Rise in aluminum price; 2) more stimulus policies in China.
　　Risks: 1) Rise in coal price; 2) China’s aluminum demand may miss expectations; 3) overseas projects risk.