Guinea bauxite exports to China bring cost advantages! Citi: CHINAHONGQIAO (01378) upstream layout poised for harvest, target price HK$48

Citi said in a research report released recently that in recent years, China's aluminum industry has become increasingly dependent on imported bauxite. Since 2020, China's bauxite imports have grown rapidly, with a growth rate far exceeding that of aluminum output (the end use of bauxite). Against the backdrop of Chinese companies advancing projects at an unprecedented pace to supply the Chinese market, Guinea has become an important source of China's imported bauxite. According to data from the U.S. Geological Survey, Guinea holds nearly one-quarter of the world's known bauxite resources. Therefore, as a major supplier to the world's largest bauxite market, Guinea has always had the potential to become an important supplying country. However, due to years of political instability and slow project execution, Guinea only exported bauxite to China occasionally before 2016. But this situation has changed. China's bauxite imports from Guinea have grown for eight consecutive years, and in the first eight months of 2026, on an annualized basis, imports reached 187 million tonnes. In 2025, China's total bauxite imports increased by 26% year on year. Among them, bauxite imports from Guinea rose 35% year on year, raising Guinea's share of China's bauxite imports to 74%, up from 69% in 2024. In the first eight months of 2026, China's bauxite imports increased by 10% year on year. Among them, bauxite imports from Guinea rose 16% year on year, accounting for 80% of China's total bauxite imports during the same period. Citi pointed out that most of the growth in Guinea's bauxite output and exports came from the SMG/WAP project led by CHINAHONGQIAO (01378), the world's largest aluminum producer. The SMG/WAP project was launched in 2015 and added more than about 50 million tonnes of export capacity around 2018. With the commissioning of this project, the size of the true third-party bauxite market has shrunk. Citi added that the de facto "upstream integration" achieved by Chinese smelters has reduced demand for traded bauxite, thereby structurally depressing bauxite prices, which is conducive to profit margins. Citi's target price for CHINAHONGQIAO is HK$48.0, corresponding to 13.0x expected 2026 price-to-earnings ratio, in line with the average level of Chinese peer companies.