China Hongqiao (1378.HK): Roadshow feedback: catalysts ahead

We recently hosted a series of investor meetings with Hongqiao's Head of IR in London following the recent H1 results. In summary, the core operations are performing well and the company continues to make steady progress on the transition of smelting capacity to Yunnan Province. The company emphasised its commitment to shareholder returns, supported by robust cash flow generation and a strong balance sheet. As outlined in our recent initiation report, we expect FCF to inflect materially through 2026-27E, providing scope for both dividends and share buybacks. Hongqiao is trading on an attractive 2027E EV/EBITDA of 3.3x and FCF yield of 18%. Buy. On China's 45 mtpa aluminium capacity ceiling, the company expects domestic primary output to remain constrained by the capacity cap and highlighted the possibility for tighter policy measures over time to support carbon peak before 2030 and carbon neutrality before 2060. Rising bauxite, coal and logistics costs continue to put upward pressure o