Guoxin Securities released a research report stating that it maintains China's Hongqiao (01378) “buy” rating. Assuming that the average spot price of aluminum in 2024-2026 is 19,500 yuan/ton, the price of alumina is 3,300 yuan/ton, the price of pre-baked anodes is 4,000 yuan/ton, the factory price of 5,500 kcal thermal coal is 900 yuan/ton, and the tax-inclusive price of hydropower in Yunnan is 0.44 yuan/kilowatt. Future cost fluctuations will decrease, and the company's profitability will be more stable. Taking advantage of this high boom cycle of electrolytic aluminum and opportunities for capacity transfer, the company continues to escape the pressure that restricts long-term development and has more sustainable development capabilities in the future.
The main views of Guoxin Securities are as follows:
The company's net profit to mother increased 32% in 2023.
China Hongqiao disclosed its 2023 annual results. The company's 2023 revenue was 133.6 billion yuan, up 1.5% year on year; net profit to mother was 11.46 billion yuan, up 31.7% year on year; net cash inflow from operating activities was 7.722 billion yuan, up 1.3% year on year. The increase in profits was mainly due to a drop in the prices of raw materials coal and pre-baked anodes. The company sold 5.748 million tons of aluminum alloy products, an increase of 275,000 tons over 2022; sales of aluminum deep-processing products were 580,000 tons, down 29,000 tons from the previous year; sales of alumina were 10.374 million tons, an increase of 2.076 million tons over the previous year. Mainly, the company acquired 2.5 million tons of production capacity at the end of 2022, and foreign sales increased.
Continued high dividend ratio:
The 2023 final dividend was HK29 cents per share, together with the 2023 interim dividend of HK34 cents per share and the cumulative 2023 dividend of HK63 cents per share. The total cash dividend was RMB 5.45 billion, and the dividend payment rate reached 47.6%. The company's dividend payout ratio for 2021-2023 was 50.37%/50.36%/47.6%, respectively.
Prices of energy raw materials are stabilizing, and the company's performance is more stable.
The company has a full industrial chain layout. The biggest risk exposure on the raw material side is coal and pre-baked anodes. Excluding the aluminum price factor, the main reason for the sharp fluctuation in the company's performance over the past few years is the sharp fluctuation in the prices of coal and pre-baked anodes. The sharp rise in thermal coal prices and pre-baked anode prices in 2022 overwhelmed the company's profits. In 2023, the reversal of these factors led to a significant increase in the company's profit. Once smelting profits improve, the company is one of the targets with the highest profit flexibility in the industry.