China Hongqiao Group Limited (Surveillance Report)

Lianhe Ratings Global Limited (“Lianhe Global”) has affirmed ‘BB+’ global scale Long-term Issuer and Issuance Credit Ratings of China Hongqiao Group Limited; Issuer Rating Outlook Revised to Positive.

The Issuer Rating reflects China Hongqiao Group Limited’s (1378.HK) (“China Hongqiao” or “the company”) established leading market position, cost advantage backed by its vertically integrated production platform and economies of scale, as well as the solid financial performance supported by the prevailing high aluminum prices. However, China Hongqiao’s rating is constrained by the cyclical nature of the aluminum industry, policy and concentration risks.

The Positive Outlook reflects our expectation that China Hongqiao will maintain its operating performance and further improve its financial leverage, given its strong cash generation capability. We also expect China Hongqiao to be able to manage the execution risks related to its capacity migration to Yunnan Province. The production volume of transferred capacity should ramp up smoothly without compromising China Hongqiao’s operating efficiency.