1H25 results in line with our expectations The firm announced its 1H25 results: Revenue rose 10.1% YoY to
　　about Rmb81.04bn; gross profit grew 16.9% YoY to about Rmb20.81bn; attributable net profit rose 35.0% YoY to over Rmb12.36bn. The 1H25 financials were in line with our expectations.
　　The firm's earnings hit a historical high, driven by rising product
　　sales volume and prices. The firm's sales volume of aluminum alloy rose 2.4% YoY to nearly 2.91mnt, with the ASP up 2.7% YoY to about Rmb17,853/t (excluding value-added tax, the same below); sales volume of alumina rose 15.6% YoY to nearly 6.37mnt, with the ASP rising 10.3% YoY to Rmb3,243/t. Gross profit per tonne rose 5.3% YoY to Rmb4,505 for aluminum alloy and 24.8% YoY to Rmb934 for alumina.
　　Continued implementation of a large-scale share buyback plan shows confidence in future growth. According to the announcement,
　　from January 15 to May 12, 2025, the company repurchased HK$2.6bn or 187mn ordinary shares and cancelled them all. This accounted for 1.98% of the end-2024 share capital. The company plans to continue repurchasing shares of no less than HK$3bn based on its confidence in the prospects and long-term investment value.
　　Trends to watch
　　Aluminum leader with an integrated green value chain to continue improving its presence in the upstream and downstream.
　　Upstream: According to the firm's announcement, it has developed a bauxite supply base in Guinea with an annual production capacity of about 60mnt. This base will ensure its advantage in raw material costs. The firm's alumina production capacity will grow 8% YoY to 21mnt in 2025
　　after it relocates and renovates domestic production facilities.
　　Midstream: The firm's electrolytic aluminum production capacity totals 6.46mnt/yr, and it is relocating part of its production capacity from
　　Shandong to Yunnan. According to the announcement, the firm has relocated 1.49mnt of annual production capacity as of end-2024, and it plans to relocate about 450,000t in 2025 and 1.07mnt in 2026-2027.
　　According to Wind, the firm recovered a 25% minority interest in Yunnan 　　Hongtai on July 23. Its attributable electrolytic aluminum production capacity may rise 6%.
　　Downstream, the firm continues to expand its automobile lightweighting business to build a green recycling industry matrix.
　　Four advantages highlight the investment value of China Hongqiao.
　　First, its profit and valuation have large upside potential, and its capacity- to-market-cap ratio is high among comparable electrolytic aluminum companies. The firm is poised to benefit from future aluminum price hikes.
　　Second, the company is highly self-sufficient in resources and can withstand risks, with its self-sufficiency in bauxite and alumina exceeding 100%. Third, the firm has a high dividend yield of 7.8%, making it attractive to investors. Fourth, the firm is building a green aluminum value chain through both primary and recycled aluminum, and we expect it to enjoy a higher price premium in the future.
　　Financials and valuation
　　We keep our 2025 and 2026 earnings forecasts unchanged at Rmb24.44bn and Rmb25.12bn. The stock is trading at 8.3x 2025e and 8.0x 2026e P/E. Considering the valuation improvement driven by market risk appetite and the firm's high dividend, we raise our target price 24% to Rmb29.29, implying 10.4x 2025e and 10.0x 2026e P/E and offering 25% upside. Maintain OUTPERFORM.
　　Risks
　　Fluctuations in product prices; disappointing overseas capacity expansion; disappointing demand; overseas disruptions.