SDIC International Securities: China Hongqiao (01378) has impressive interim results and high dividend attraction

The Zhitong Finance App learned that SDIC International Securities released a research report saying that China Hongqiao (01378) released interim results: achieving revenue of 81.04 billion yuan (RMB, same below) in the first half of 2026, up 8.0% year on year; net profit to mother of 12.36 billion yuan, up 39.2% year on year; gross profit margin 31%, up 5 percentage points year on year; net profit margin 20%, up 5 percentage points year on year. The rapid growth in performance was mainly due to the sharp year-on-year increase in aluminum prices in the first half of the year and the company's excellent management level and integrated operation. The company's total repurchase amount in the first half of the year was HK$5.2 billion. The dividend payout ratio last year was 65%. It is expected that dividends will continue to be high this year. According to Bloomberg's unanimous expectations, net profit forecasts for 2026/2027 are 33/32.5 billion yuan respectively, corresponding to about 6.1 times P/E. Based on current prices and 65% dividend rate, the annual dividend rate is expected to be close to 10%. The bank believes that the company is an excellent high-dividend target, and investors are encouraged to pay attention.

SDIC International Securities's main views are as follows:

The price of electrolytic aluminum has increased, and profit margins have increased

In the first half of the year, the company achieved gross profit of 27.53 billion yuan, an increase of 32.3% over the previous year. Alumina sales were 6.917 million tons, up 8.6% year on year; sales of electrolytic aluminum were 2.81 million tons, down 3.3% year on year; sales of aluminum alloy deep processing products were 444,000 tons, up 23.2% year on year. Shipping was blocked in the first half of the year due to the US-Iran war. Higher energy costs led to a decrease in production capacity in major global electrolytic aluminum production regions, a sharp increase in demand for superimposed energy storage and power grids, rising the price of electrolytic aluminum, and further widening domestic and foreign price differences. According to the trend of aluminum prices on the Shanghai Futures Exchange, the average monthly spot price in the first half of the year was about 24,254 yuan/ton, an increase of 19.4% over the previous year.

The pattern of tight aluminum supply continues, and aluminum prices are expected to fluctuate at a high level in the second half of the year

Looking at aluminum demand for the whole of last year, according to Antec data, downstream mainly consists of buildings and structures (accounting for 25%), electronics and electricity (accounting for 21.1%), transportation (accounting for 15.2%), and durable consumer goods (accounting for 14.6%). Last year, electronics and electricity, transportation, mechanical equipment, and durable consumer goods all achieved relatively rapid growth. Meanwhile, the domestic supply side of electrolytic aluminum still maintains a production capacity ceiling of 45 million tons/year. Although overseas electrolytic aluminum production capacity is expected to expand, the progress of resuming production and expansion is currently slower than planned. The company expects the price of electrolytic aluminum to be between 23,600 yuan/ton and 24,300 yuan/ton in the second half of this year. The alumina sector maintained an excess trend. The price in the second half of the year was around 2,700 yuan/ton; however, the cost of the company's alumina was superior to that of the market, and it is still in a marginal position.

The impairment has had an impact, and the impact is expected to be small in the second half of the year

The impairment in the first half of the year was about 1.1 billion yuan, mainly including the impairment of raw materials and the impairment of the two power plant units. The reason was that the price of alumina was greatly reduced and there were no plans to upgrade the two units. It is expected that alumina will not have much impairment demand in the second half of the year.

Debt reduction has achieved remarkable results, maintaining a stable annual dividend policy

In the first half of the year, the company's interest-bearing debt fell sharply by 7 billion yuan to 67.4 billion yuan, the balance ratio decreased by 1.7 percentage points to 40.5%, financial expenses decreased by 170 million yuan in the first half of the year, and the comprehensive financing interest rate fell to 3.9%. The results of debt reduction were remarkable. On the other hand, the company maintains a stable dividend policy throughout the year. The company's dividend payout rate reached 65% last year, and it is expected that this year it will still give back to shareholders with a high-percentage dividend policy. The company continued to make repurchases in the first half of the year. The total amount of repurchases reached HK$5.2 billion, and the total number of shares cancelled reached 159 million.

The current price dividend rate is expected to be close to 10%, so it is recommended to pay attention

According to Bloomberg's unanimous expectations, the 2026/2027 net profit forecast is 33/32.5 billion yuan, and the expected P/E is 6.1/6.1 times, respectively. The company's annual dividend rate is expected to be close to 10%, which is expected to be attractive when calculated based on the current price and the expected net profit to mother and a dividend rate of 65%.

Risk Alerts

Demand fell short of expectations, supply releases exceeded expectations, aluminum prices fell rapidly, and the Federal Reserve's interest rate rose.