High earnings sensitivity to aluminium price, high dividend payout; initiate with BUY

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR <GO> OR http://www.cmbi.com.hk 1 MN 12 May 2026 CMB International Global Markets | Equity Research | Initiation Hongqiao Holdings (002379 CH) Hongqiao Holdings (002379 CH) - High earnings sensitivity to aluminium price, high dividend payout; initiate with BUY High earnings sensitivity to aluminium price, high dividend payout; initiate with BUY Our latest industry analysis suggests that the global aluminium supply deficit will widen in 2026E and will remain in place in 2027E (see our sector note published today). We believe Hongqiao Holdings, which carries the majority of operating assets of China Hongqiao (1378 HK, BUY), will benefit from the elevated aluminium price. We like Hongqiao Holdings’ high earnings sensitivity (~3.3% for 1% change in aluminium price) and high potential dividend payout ratio (75% in our model assumption). Initiate with BUY with TP of RMB29, based on 13.2x 2026E P/E, equivalent to 20% premium to our target multiple (11x) for China Hongqiao. Our premium is in line with the current A/H premium of Chalco (2600 HK/601600 CH, NR).  Comparison with China Hongqiao. After the completion of backdoor listing in Dec 2025, China Hongqiao currently owns 89% interest in Hongqiao Holdings. Hongqiao Holdings differs from China Hongqiao in several key aspects: (1) It has no equity interest in bauxite business; (2) Its alumina capacity is 2mt less than China Hongqiao as the Indonesia alumina is not included; (3) It does not own captive power plants.  Key assumptions. For the duplicated business lines, our key operating assumptions are the same as that for China Hongqiao. For 2026E, we forecast 15% YoY increase in aluminium price and 13% YoY decline in alumina price. For 2027E, we forecast aluminium / alumina price to only slightly drop 3%/5% YoY.  More sensitive to aluminium price. We estimate every 1% increase in aluminium price will boost Hongqiao Holdings’ 2026E earnings by ~3.3% (other factors being constant). This is more sensitive than China Hongqiao’s 2.3%, based on our calculation.  High dividend payout ratio to support China Hongqiao. China Hongqiao’s dividend payout ratio was >66% in 2025. Assuming that China Hongqiao is to maintain such ratio going forward, Hongqiao Holdings will have to maintain a high payout ratio.  Key risks: (1) unexpected removal of capacity cap in China; (2) faster-than-expected overseas capacity ramp-up for the industry as a whole; (3) slowdown of the global economy; (4) sharp increases in costs of input such as bauxite and coal. Target Price RMB29.00 Up/Downside 25.2% Current Price RMB23.16 China Materials Wayne FUNG, CFA (852) 3900 0826 waynefung@cmbi.com.hk Jake Zhang (852) 3900 0849 jakezhang@cmbi.com.hk Stock Data Mkt Cap (RMB mn) 301,800.7 Avg 3 mths t/o (RMB mn) 703.3 52w High/Low (RMB) 32.53/10.14 Total Issued Shares (mn) 13031.1 Source: FactSet