Positive Outlook for China Hongqiao Group Ltd Amid Rising Bauxite and Alumina Prices

DBS analyst Lee Eun Young maintained a Buy rating on China Hongqiao Group Ltd. (1378 – Research Report) on May 20 and set a price target of HK$18.00.

Lee Eun Young’s rating is based on several key factors that suggest a positive outlook for China Hongqiao Group Ltd. The recent revocation of bauxite mining rights in Guinea is expected to lead to a rebound in bauxite and alumina prices, which is beneficial for China Hongqiao due to its significant stake in SMB, a company with established transportation channels in Guinea. This strategic position ensures a steady supply of bauxite, crucial for its alumina production, and positions China Hongqiao to capitalize on the anticipated price increases.
Moreover, China Hongqiao’s extensive alumina production capacity in China, coupled with its cost advantages from Guinean bauxite, allows it to benefit from rising alumina prices. The company not only meets its production needs but also sells alumina to third parties, which could lead to improved business margins. Consequently, Lee Eun Young has revised the earnings per share forecast for FY25 upwards and increased the price target to HKD18, reinforcing the Buy rating due to these favorable market conditions and strategic advantages.