Damo: Giving China Hongqiao (01378) an “increase in holdings” ratings, a sharp rise in volume and price drives up profits

The Zhitong Finance App learned that Morgan Stanley released a research report to give China Hongqiao (01378) an “increase in shares” rating. The target price is HK$28.6. According to the report, China Hongqiao's net profit for the first half of 2026 increased 39% year-on-year to 17.2 billion yuan, in line with expectations.

According to the report, China's strong profit in Hongqiao in the first half of the year was mainly due to the following factors: due to disruptions in global supply, aluminum prices rose 18.7% year on year; sales of aluminum alloy deep processing products increased 23.2% year on year. Overall gross margin increased 5.8 percentage points year-on-year to 31.5%, compared to 25.7% in the same period last year. The net debt ratio declined further from 29% in the first half of 2025 to 21% in the first half of 2026, and debt levels continued to decline. Financing costs fell 14% year over year to RMB 1.1 billion, reflecting financial improvements brought about by the optimization of the debt structure and declining interest rates.

Looking ahead to the second half of the year, Morgan Stanley believes the company's profits are expected to remain steady. Although some production capacity in the Middle East has recovered earlier than expected, and production in Indonesia is gradually increasing, the overall global supply of aluminum is still in short supply this year, and aluminum prices are expected to remain high, supporting the profits of Hongqiao in China in the second half of the year.

Morgan Stanley emphasized that in terms of current stock prices, China's Hongqiao valuation is attractive, and the dividend return is impressive.