Shenwan Hongyuan: Maintaining China's Hongqiao (01378) holdings increase rating, boosting rising aluminum prices, boosting new high performance, repurchases and consolidating shareholder returns
The Zhitong Finance App learned that Shen Wan Hongyuan released a research report saying that China's Hongqiao (01378) announced 2026 interim results, which are in line with expectations. In the first half of 2026, the company achieved operating income of RMB 87.506 billion, +8.0% year on year; net profit to mother was RMB 17.210 billion, +39.2% year over year. Shen Wan Hongyuan maintained its “increase in holdings” rating. The company's net profit for 2026-2028 is estimated to be RMB 332/344/37.8 billion yuan, respectively, and the corresponding PE is 6/6/5 times, respectively.
Shen Wan Hongyuan's main views are as follows:
The company announced 2026 interim results, in line with expectations
In the first half of 2026, the company achieved operating income of RMB 87.506 billion, +8.0% year on year; realized net profit to mother of RMB 17.210 billion, +39.2% year on year. The main reason for the increase in performance was the year-on-year increase in sales prices of aluminum alloy products (electrolytic aluminum), and the year-on-year increase in sales volume and sales prices of aluminum alloy processed products.
Separation of business data
Electrolytic aluminum: 26H1 sold 2.81 million tons, -3.3% year over year, achieving revenue of RMB 59.58 billion, +14.8% year over year; average sales price was 21,192 yuan/ton, +18.7% year on year; gross profit margin of 38.5%. Aluminum alloy deep processing products: 26H1 sold 444,000 tons, +23.2% year over year, achieving revenue of RMB 10.39 billion, +39.7% year over year; average sales price of 23,436 yuan/ton, +13.4% year on year; gross profit margin of 32.7%. Alumina: 26H1 sold 6.917 million tons, +8.6% year over year, achieving revenue of RMB 16.09 billion, with an average sales price of 2,327 yuan/ton, -28.3%; gross margin of about 6.3%; 78.6% of the bauxite used in production comes from Guinea, relying on the joint venture's upstream resource layout to stabilize raw material costs.
The financial structure continues to be optimized, and repurchases+dividends consolidate shareholder returns
As of June 30, 2026, the company's interest-bearing liabilities were 67.4 billion yuan, a sharp decrease of 7 billion yuan from the end of 2025; the balance ratio decreased by 1.7 percentage points from about 42.2% at the end of December 2025 to about 40.5% at the end of June 2026; the share of long-term debt increased slightly to 62.4%, and the debt maturity structure continued to be optimized; and financial expenses were 1.11 billion yuan, -13.6% year-on-year. The total number of shares repurchased and cancelled by the company in the first half of 2026 was about 159 million shares, and the total repurchase amount was about HK$5.2 billion; in 2025, the company's dividend ratio was about 65%, and the stable high dividend ratio is expected to continue.
Production cuts in the Middle East led to a contraction in supply, and there is still uncertainty about overseas markets in the future
In the first half of 2026, production capacity declined sharply due to production cuts brought about by the Middle East conflict. Supply and demand in the global electrolytic aluminum market showed tight supply, compounding the sharp increase in demand for energy storage and power grids, boosting the price of electrolytic aluminum and further widening domestic and foreign price differences. The subsequent resumption of production was still limited by geographical influence. Additional overseas production capacity is constrained by electricity bottlenecks. Furthermore, on June 10, 2026, the State Council issued Order No. 837, and the “State Council's Regulations on Foreign Investment” were officially announced. It will take effect on July 1, 2026 to further strengthen the regulation of foreign investment activities. The bank expects the increase in overseas electrolytic aluminum plans at the industry level to be affected, and investment and construction may be delayed.
Maintaining an “Overweight” rating
The company is an electrolytic aluminum manufacturer with obvious advantages in integration. It has leading overseas bauxite resource layout, high alumina and electricity self-sufficiency ratio, and the company's dividend ratio in 2025 is about 65%, which highlights its high dividend value. Domestic electrolytic aluminum production capacity is approaching the ceiling, global supply is tightening due to overseas production cuts, and the aluminum price center is expected to rise. Therefore, the profit forecast for 2026 was raised, and the profit forecast for 2027/2028 is expected to be RMB 332/344/37.8 billion yuan (the original forecast was RMB 322/344/37.8 billion yuan), corresponding to PE by 6/6/5, maintaining the “increase” rating.
Risk Alerts
Downstream demand for electrolytic aluminum fell short of expectations; raw material costs fluctuated greatly; overseas production of electrolytic aluminum exceeded expectations.