Our latest industry analysis suggests that the global aluminium supply deficit will widen in 2026E and will remain in place in 2027E . 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-thanexpected 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.