Guolian Minsheng Securities has released a research report stating that the aluminum industry continues to experience a tight supply-demand balance, with the price center for aluminum shifting upwards. The transition to green energy is also expected to support long-term development. The report forecasts that CHINAHONGQIAO (01378) will achieve net profits attributable to shareholders of RMB 36.85 billion, RMB 37.74 billion, and RMB 39.03 billion for the years 2026 to 2028, respectively. Based on the current share price, this translates to a price-to-earnings (P/E) ratio of 8x for each of those years. Consequently, the "Recommend" rating is maintained.

Key points from Guolian Minsheng Securities' report are as follows:

The company released its 2025 annual report. 1) Financial Performance: In 2025, the company achieved revenue of RMB 162.35 billion, a year-on-year increase of 4.0%. Net profit attributable to shareholders was RMB 22.64 billion, up 1.2% year-on-year. For the second half of 2025 (H2 2025), revenue was RMB 81.31 billion, up 0.3% compared to the first half, with a net profit attributable to shareholders of RMB 10.28 billion. 2) Dividend: For 2025, the company proposed a dividend of 165 Hong Kong cents per share, representing a total cash distribution of approximately RMB 14.42 billion. The dividend payout ratio stands at 63.7%, and based on the share price on March 24th, the dividend yield is 4.8%.

Primary Aluminum: Stable production and sales, with profitability improving due to rising aluminum prices. 1) Volume: In 2025, the company's primary aluminum sales volume was 5.824 million tonnes, remaining largely flat compared to the previous year. Sales in H2 2025 were 2.918 million tonnes, also essentially unchanged from the first half. 2) Price: The average aluminum price in 2025 was RMB 20,721 per tonne, an increase of 4.0% year-on-year. The price in the fourth quarter of 2025 (Q4 2025) reached RMB 21,534 per tonne, up 4.0% from the previous quarter. 3) Cost & Profit: In 2025, the production cost per tonne of aluminum was RMB 13,000, with a gross profit per tonne of RMB 5,200, an increase of RMB 900 year-on-year. In H2 2025, the production cost per tonne was RMB 12,700, and the gross profit per tonne was RMB 5,900, an increase of RMB 1,400 from the first half.

Core Investment Highlights: 1) Comprehensive Integrated Industrial Chain Layout. The company possesses compliant primary aluminum production capacity of 6.459 million tonnes. As of May 2025, capacity in Shandong stood at 4.971 million tonnes, while capacity in Yunnan was 1.488 million tonnes. Its alumina production capacity totals 21 million tonnes, comprising 19 million tonnes domestically and 2 million tonnes in Indonesia. Through a joint venture, the company is involved in a bauxite project in Guinea with a capacity of 50 million tonnes. Holding a 22.5% stake, this translates to an attributable equity capacity of 11.25 million tonnes. The company's integrated layout across bauxite, alumina, and primary aluminum is well-established, ensuring strong raw material security.

2) Relocation of Primary Aluminum Capacity to Yunnan, Aided by Green Power for Long-Term Development. Since 2019, the company has been relocating primary aluminum capacity to Yunnan province, where the power supply is predominantly hydroelectric. Against the backdrop of carbon peak and carbon neutrality goals, the premium for green aluminum is increasing, which is beneficial for the company's long-term development.

3) Equity Stake in Guinean Iron Ore Project, Horizontally Expanding into Iron Ore Resources. The company's subsidiary, Weiqiao Aluminum & Power, and Winning Logistics each hold a 50% equity interest in WCH. WCH indirectly holds rights to develop and produce iron ore from Blocks 1 and 2 of the Simandou iron ore project in Guinea. In the future, Weiqiao Aluminum & Power is expected to benefit from the corresponding returns on this iron ore investment.

Risk Warning: Potential for overseas new capacity to exceed expectations in its release, delays in the Yunnan primary aluminum projects, and aluminum demand falling short of expectations.