Western Securities: China Hongqiao ( maintains abundant future operating net cash flow and maintains a "Buy" rating

2026-04-01 03:39:46

Abstract generation in progress

Western Securities released a research report saying that China Hongqiao (01378) saw year-over-year growth in both revenue and profit in 2025. After adding back changes in the fair value of financial instruments, the net profit attributable to shareholders will reach RMB 26 billion+, which is above expectations. As the company’s capital expenditure declines, the firm expects the company’s future operating net cash flow to be even more robust. The firm expects the company’s EPS for 2026–2028 to be 3.24, 3.50, and 3.78 yuan, respectively, and its PE to be 9, 9, and 8 times, respectively, maintaining a “Buy” rating.

The main viewpoints of Western Securities are as follows:

Event: The company announced its 2025 annual report. Revenue was RMB 162.354 billion, up 3.96% year over year; net profit attributable to shareholders was RMB 22.636 billion, up 1.18% year over year; and it proposed to distribute a dividend of HKD 1.65 per share.

After adding back the fair value changes of financial instruments, performance meets expectations, and operating net cash flow is especially impressive. According to the company’s 2025 annual report, revenue was RMB 162.354 billion, up 3.96% year over year; net profit attributable to shareholders was RMB 22.636 billion, up 1.18% year over year; of which the main factor was fair value changes in financial instruments of -RMB 3.782 billion (affected by changes in the fair value of convertible bond market value). If this portion of fair value changes is added back, the company’s net profit attributable to shareholders will reach RMB 26 billion+, which is above expectations.

In terms of profitability, in 2025 the company’s gross margin was 25.56% and its net profit margin was 14.88%. The asset-liability ratio was 42.25%, down 5.99 percentage points year over year. Operating net cash flow was RMB 38.995 billion, up 14.75%. At the same time, it is also important to note that the company’s capital expenditures in 2025 were RMB 10.657 billion, and the capital commitments for constructing plants in the future were RMB 5.833 billion. Compared with 2024 (capital expenditures were RMB 12.609 billion and future capital commitments for constructing plants were RMB 7.455 billion), both declined. The firm believes that the company’s future operating net cash flow will be more abundant.

By business segment:

Aluminum alloy: sales volume was 5.824 million tons, flat year over year; the average selling price was RMB 18,216 per ton (excluding tax), up 3.8% year over year; revenue was RMB 106.096 billion, up 3.6% year over year; gross margin was 28.5%, up 3.9 percentage points year over year.
Alumina: sales volume was 13.397 million tons, up 22.7% year over year; the average selling price was RMB 2,899 per ton (excluding tax); revenue was RMB 38.834 billion, up 4.0% year over year; gross margin was 22.2%.
Aluminum alloy processing: among them, sales volume of deep-processed products was 0.716 million tons, flat year over year; the average selling price was RMB 20,874 per ton (excluding tax), up 3.1% year over year; revenue was RMB 14.956 billion, up 4.0% year over year; gross margin was 19.2%.

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