Citi issued a research report, maintaining a 'Buy' rating for China Hongqiao (01378), and raised the target price from HKD 25.2 to HKD 36, while keeping Hongqiao as its top pick.
China Hongqiao’s management confirmed the company’s commitment to enhancing shareholder returns through dividends and share buybacks. According to management, the company is seeking to secure greener power supplies in China, a strategy also adopted by its peer, Chalco. Meanwhile, the company’s chairman expressed cautious optimism about the expansion of aluminum production capacity in Indonesia.
Long-term positive outlook on the aluminum industry
The aluminum industry remains one of Citi's most favored sectors, as the bank expects aluminum supply to remain tight due to China's capacity cap policy (annual capacity of 45.2 million tons) and no explosive increase in capacity in Indonesia, which will keep aluminum gross margins high over the long term.
The bank raised its earnings forecasts for China Hongqiao for the years 2025/26/27 by +2%/+5%/+7%, respectively, to RMB 24.4 billion/27.9 billion/30.3 billion, reflecting higher aluminum and alumina sales volumes and an upward revision in aluminum price forecasts.
Management commits to enhancing shareholder returns
Notably, with a focus on shareholder returns, the company is concentrating on maintaining a high dividend payout ratio and share repurchases. Despite strong year-to-date stock performance, as of the close on November 4, Hongqiao's forecast dividend yield for 2026 remained attractive at 6.7%. Citi expects Hongqiao to continue benefiting from sustained high gross margins in the aluminum industry, and the stock is likely to undergo further valuation re-rating.