By mid-November, as 2024 approaches, looking back at this past year, the Hong Kong stock market has been full of ups and downs. Among the most outstanding industries and individual stocks, it's hard to ignore chinahongqiao (01378) in the resources sector.

As a global leading manufacturer of aluminum products, chinahongqiao's stock price trend this year can be described as steadily rising. As of the close of trading on November 14, chinahongqiao has seen a maximum increase of 234.5% year-to-date. Despite some recent pullback in the overall market, chinahongqiao, which hit a historic high just last week, has experienced some correction in the past few trading days, but its cumulative increase within the year still outperforms the sector significantly, far surpassing the three major Hong Kong stock indexes.

Financial app Zhitong believes that chinahongqiao's aggressive stock price increase is attributed to the company's strong growth elasticity and certainty in the aluminum industry's upward cycle.

Taking a recent example, at the end of October, chinahongqiao disclosed the financial data of its subsidiary Shandong Hongqiao New Materials Co., Ltd. (referred to as 'Shandong Hongqiao') for the nine months ended September 30. The announcement shows that in the first three quarters, Shandong Hongqiao achieved revenues of 110.07 billion yuan, a year-on-year increase of 12.5%; net income of 15.75 billion yuan, a year-on-year increase of 141.4%. In the third quarter alone, revenue was 38.02 billion yuan, a year-on-year increase of 13.9% and a quarter-on-quarter increase of 2%; net income was 5.96 billion yuan, a year-on-year increase of 38%, also showing a 9.4% increase quarter-on-quarter.

Considering that Shandong Hongqiao is the core operating entity of chinahongqiao, this means that through the former's financial data, we can basically glimpse at chinahongqiao's performance trends. In other words, based on this newly released subsidiary's third quarter report, it can be foreseen that chinahongqiao's performance trend in the second half of the year will continue the strong growth momentum of the first half.

Furthermore, looking at recent industry trends, the continuously rising prices of alumina and electrolytic aluminum actually indirectly confirm that investors can look forward optimistically to chinahongqiao's performance.

Taking aluminum oxide as an example, according to Antaike data, the average ex-factory price of aluminum oxide in shandong in the third quarter was 3920 yuan per ton, up 37.3% year-on-year and 7.9% month-on-month. It is reported that the domestic aluminum oxide price is further strengthening, which is related to the continuous increase in overseas aluminum oxide prices during the same period. In recent times, due to events such as the shortage of natural gas supply in australia, shipping delays due to hurricanes in jamaica, and red mud spillage outside aluminum oxide plants in india, overseas aluminum oxide prices have remained relatively strong.

As for electrolytic aluminum, the average price of domestic electrolytic aluminum in the third quarter was 19562 yuan per ton, also up by 3.8% year-on-year, maintaining high-level operation.

Looking at the cost side, raw material prices continued to decline in the third quarter, which is obviously also beneficial for Chinahongqiao to further increase its profits. Data shows that the average price of prebaked anodes in shandong in the third quarter was 4168 yuan per ton, down 9.4% year-on-year and 2.3% month-on-month; during the same period, the average closing price of Q5500 thermal coal in Qinhuangdao Port was 848 yuan per ton, a decrease of 2.1% year-on-year.

Apart from the favorable industry environment as the foundation, what is even more rare is that over the years, the integrated advantage of Chinahongqiao's own business has also taken a significant step forward. This is also the key reason why the company has been able to achieve better growth performance than its peers in the industry during the upward trend.

For example, in the upstream sector, Chinahongqiao strategically positioned itself with a forward-looking vision to lay out overseas bauxite resources many years ago. By the end of last year, Chinahongqiao's annual bauxite production capacity in Guinea had reached 50 million tons, which means that the company can continue to maintain a significant cost advantage in the trend of increasing dependence on imported bauxite resources in the domestic market.

In the midstream sector, Chinahongqiao's comprehensive layout maximizes its cost advantage. It is reported that currently Chinahongqiao's self-sufficiency rate for aluminum oxide exceeds 100%, while the overall self-sufficiency rate for electricity is about 52%, with a significant cost advantage in self-generated electricity. As a result, the company's main cost risks are in the procurement costs of thermal coal (used for self-generated electricity) and prebaked anodes. Since 2023, due to the continuous decrease in procurement costs of these two major raw materials, the disruptive impact of cost fluctuations on Hongqiao's profitability has remained within a small range.

In addition, under the 'dual carbon' background, Chinahongqiao is actively promoting energy transformation. In the future, the company will relocate a total capacity of 3.96 million tons per year to Yunnan, accounting for 61.3% of all production capacity. At the same time, Chinahongqiao is accelerating the construction of photovoltaic power generation and other new energy projects, and continuously coordinating the layout of wind, solar, and water energy storage to cope with the impact of dry seasons in Yunnan. Considering that hydroelectric-powered aluminum is more cost-competitive than thermal-powered aluminum, it is easy to see that Hongqiao's current strategy of vigorously developing hydroelectric-powered aluminum will further enhance the company's profit elasticity in the near future.

While consolidating its leading position in traditional advantageous areas, Chinahongqiao is also taking an enterprising attitude to accelerate the extension of its business to downstream industries, focusing on the development of lightweight components and other businesses, striving to create a second growth curve. Data shows that Chinahongqiao currently has an annual capacity of 1.17 million tons for deep aluminum processing, owning the world's largest smelting production line, with a maximum casting capacity of 0.42 million tons. In the field of lightweight materials, the company's Shandong Hongcan Automotive Lightweight Large-scale Integrated Die-casting Project was completed and put into production last year, while other automotive lightweight aluminum alloy extrusion integrated projects, all-aluminum intelligent trailers, all-aluminum containers and city sanitation vehicles projects, special light alloy material projects, and high-precision aluminum thin sheet and strip projects are expected to be successively put into production by the end of 2026, when the company's economies of scale are expected to be further amplified.

The fundamentals are impeccable, and equally commendable is the dividend attribute of Chinahongqiao is rapidly enhancing. Looking back at history, the company has implemented a dividend scheme every year since its listing in 2011, and in recent years, with the steady enhancement of the company's profitability, Chinahongqiao's dividend distribution is further increasing. According to the interim report, Chinahongqiao's interim dividend this year reached HK$0.59 per share, and calculated at the current price, the company's current annual dividend yield is close to 10%.

If the high growth of performance makes Chinahongqiao deeply characteristic of growth stocks, then the nearly double-digit dividend yield indicates that the company also has a high safety margin. It also combines offensive and defensive attributes, making Chinahongqiao a must-have variety in the bull market. It is no wonder that the company's stock price has outperformed this year. With the continuous growth of the company's performance, there is reason to believe that Chinahongqiao, with high elasticity and high dividends, will still be the "star" target in the Hong Kong stock market next year, and the company's future stock performance is still worth looking forward to.