EQS Newswire: China Hongqiao Group Limited: China Hongqiao releases a positive profit alert and joins the ranks of global high-dividend stocks with a yield above 10%, recommended for long-term investment

EQS Newswire / 24/06/2025 / 09:50 UTC+8

On the evening of June 23, China Hongqiao (01378.HK) released a positive profit alert, projecting an approximately 35% year-on-year rise in net profit for the first half of fiscal 2025 compared to the same period in 2024. The growth is primarily driven by higher prices and increased sales of aluminum alloy and alumina products, which boosted gross margins. The development is expected to draw renewed investor attention.

As a company characterized by low valuation and high dividend yield, China Hongqiao has attracted significant attention from institutional investors. In fact, dividend-paying sectors have long maintained a loyal base of investors drawn by the stable returns offered by those exhibiting similar financial profiles.

China Hongqiao distinguished itself with a dividend yield exceeding 10% in 2024-a rare achievement for an industry-leading company, even in the Hong Kong market with lots of high-yield company choices. As of June 23, its share price approached HK$16, hovering near record highs and showing potential to break past levels.

The Hang Seng Mainland China Companies High Dividend Yield Index (HSMCHYIT.HI) has gained over 17% year-to-date and nearly 25% over the past 12 months. High-dividend stocks have attracted strong investor interest. China Hongqiao, for instance, has surged nearly 45% so far this year.

China Hongqiao is a fully integrated aluminum giant, covering thermal power, mining, alumina, liquid aluminum alloys, aluminum alloy ingots, aluminum alloy cast-rolled products, aluminum busbars, high-precision aluminum sheets, strips and foils, as well as new materials. It is also one of the world's leading aluminum producers.

Since its listing, the company has consistently maintained dividend levels well above the industry's average. According to data from Wind, China Hongqiao has distributed dividends 19 times since going public in 2006, with total payouts nearing HK$60 billion and an average payout ratio of over 40%.

In 2024, amid rapid earnings growth, China Hongqiao's dividend payout ratio exceeded 60%, with a total annual dividend of HK$1.61 per share. At the current share price, its dividend yield surpasses 10%, far higher than the 3.76% average dividend yield of Hang Seng Index constituent stocks.

This reflects the company's stable and growth-oriented operations. Supported by lower costs and a robust aluminum market, China Hongqiao delivered record results in 2024: revenue reached RMB 156.17 billion, up 16.9% year-on-year, while net profit soared 95.2% to RMB 22.37 billion.

While the aluminum market's strong momentum continues this year, China's domestic electrolytic aluminum inventory remains at multi-year lows, while global inventories are steadily declining, thereby sustaining solid price support.

During the same period, futures prices for alumina-a key raw material for electrolytic aluminum production-continued to decline. Data shows that in April 2025, China's alumina industry had an average tax-inclusive full cost of RMB 3,103.17 per ton, down RMB 106.41 per ton (3.32%) from RMB 3,209.58 per ton in March.

Supported by these factors, profits in the electrolytic aluminum sector have remained elevated. Aided by falling coal prices that lowered major energy and power costs, China Hongqiao maintained robust growth in Q1 2025. Its core subsidiary, Shandong Hongqiao, reported a 15.56% year-on-year increase in revenue and a 46.46% year-on-year surge in net profit.

Additionally, China Hongqiao's long-term overseas investments are approaching a harvest stage. Among them, the Simandou iron ore project in Guinea-the world's largest greenfield mining development-is now in its final stage, with production and shipments expected to begin by the end of 2025. With a planned annual capacity of 60 million tons, the project is expected to further boost China Hongqiao's profitability.

Driven by the strong performance, China Hongqiao's share price has soared significantly since the beginning of 2024, rebounding over 200% from its low at the start of the year.

Nevertheless, this aluminum giant remains significantly undervalued. According to data from Wind, its recent trailing P/E ratio is just around 6×, significantly lower than that of other metals and mining companies listed in Hong Kong, suggesting considerable potential for revaluation.

Moreover, with a domestic production cap on electrolytic aluminum, China Hongqiao's industry leadership further underscores its scarcity value. Its long-standing vertically integrated operations further enhance its risk resilience and reinforce its competitive moat, supporting strong long-term growth prospects.

In fact, such significant undervaluation of high-quality assets is not uncommon in the Hong Kong market. Data from Wind shows that the average trailing P/E ratio for aluminum companies in the A-share market is currently around 12×, significantly higher than their counterparts in Hong Kong.

Encouragingly, China Hongqiao is advancing the restructuring of its core aluminum asset, Hongtuo Industrial, together with its A-share listed subsidiary, Hontron Holding. The deal was approved by Hontron Holding's shareholders on June 9. Once completed, it is expected to unlock greater valuation potential for Hongqiao's core aluminum assets in the A-share market.

Huatai Securities noted that the restructuring of Hongtuo Industrial will enhance China Hongqiao's asset securitization and boost its market influence. Coupled with its increased dividend payout ratio-raised to over 60% in 2024-the company is well-positioned for a potential valuation re-rating. Western Securities commented that, from an industry perspective, capacity caps in electrolytic aluminum and a favorable market cycle underscore the long-term scarcity value of China Hongqiao. From a company-specific perspective, Hongqiao benefits from vertically integrated operations, stable profitability, cost advantages from self-generated power and the strategic relocation of some capacity to Yunnan in alignment with industry trends. Western Securities has assigned a "Buy" rating to China Hongqiao, anticipating a future re-rating of the company's valuation.

24/06/2025 Dissemination of a Financial Press Release, transmitted by EQS News.
The issuer is solely responsible for the content of this announcement.

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