Hongqiao’s net profit came in at RMB22.6bn in 2025 (+1% YoY), which is 5%/7% below our estimate/Bloomberg consensus. Adjusted for the fair value loss of financial instrument (CB), the core net profit grew 8% YoY to RMB26.4bn (-18% YoY in 2H25 due to decline of alumina segment profit on high base effect), which is in-line with our estimate. Hongqiao proposed final dividends of HK$1.65/share, representing ~66% payout ratio. We reiterate our view that Hongqiao is a key beneficiary of the tight global supply of aluminium this year (supply disruption in the Middle east + slow progress of new capacity construction in Indonesia). We estimate every 1% increase in aluminium price will boost 2026E earnings by ~2.3% (other factors being constant). Maintain BUY with unchanged TP of HK$45, based on 11x 2026E P/E (equivalent to the historical average plus 2SD to reflect the supply constraint-driven upcycle).
Aluminum alloy products (65% of revenue in 2025): The segment revenue increased 3.6% YoY in 2025 to RMB106bn (sales volume -0.2% YoY to 5.82mn tonnes; ASP +3.8% to RMB18.2k/t). This, together with a 1.5% YoY decrease in unit cost, boosted the unit gross profit by 20% YoY to ~RMB5.2k/t.
Alumina segment (24% of revenue): The segment revenue increased 4% YoY in 2025 to RMB38.8bn (sales volume +23% YoY to 13.4mn tonnes; ASP -15% to RMB2.9k/t). Given that the segment unit cost increased by 2% YoY, the unit gross profit declined 47% YoY to RMB643/t (high base in 2024).
Aluminum fabrication products (10% of revenue): The segment revenue increased 7% YoY to RMB16.7bn (including RMB14.9bn from deep processed products sales and RMB1.7bn from other products). The segment gross margin contracted 6.3ppts YoY to 18%, due to higher sales growth of other products that carried lower margin.
Continuous improvement of balance sheet. Helped by strong operating cash inflow (RMB39bn, +15% YoY) and share placement in 2025, Hongqiao’s net debt/equity ratio reduced to 11% by end-2025 (vs 22% by end-2024). We estimate the balance sheet will turn to net cash in 2026E, given the ASP-driven earnings growth acceleration.
Key risks: (1) unexpected removal of capacity cap in China; (2) faster-thanexpected overseas capacity ramp-up; (3) slowdown of global economy; (4) sharp increases in input costs such as bauxite and coal.