The Zhitong Finance App learned that Citi published a research report, gave China Hongqiao (01378) a “buy” rating and raised the target price from HK$11.5 to HK$13.8. Citi believes that due to strong demand and still tight supply, China Aluminum's profit margin may remain high for a longer period of time.
Citi updated the model and improved its profit forecast for China's Hongqiao to take into account updated price and cost assumptions. Citi's profit forecast for China's Hongqiao 24E/25E is 29%/36% higher than market expectations, and market expectations are expected to generally rise in the next few months. The further rise in aluminum is also related to a potential manufacturing inventory replenishment cycle, maintaining China's Hongqiao as the “preferred stock.”
As of April 26, Citi estimated China's average aluminum operating profit of 4.172 yuan/ton, compared to the historical average of 1.193 yuan/ton since 2013. According to Aladdiny's data, as of the end of March 2024, China's total aluminum production capacity was 448,200 tons/year. Considering that the total aluminum production capacity reached the upper limit of about 450,000 tons/year, the utilization rate is already very high, Citi expects aluminum profit margins to remain high for a longer period of time.
Citi raised China Hongqiao's net profit forecast for 2024, 2025, and 2026 by 8%, 4%, and 0% to RMB 178, 20, and 24 billion yuan, respectively, mainly to reflect higher ASP and higher unit cost assumptions.