Research Update: Aluminum Producer China Hongqiao Outlook Revised To Stable From Positive On Weaker Demand; 'B+' Rating Affirmed

Weaker demand and lower average selling price due to the COVID-19 pandemic will push up the leverage of China Hongqiao Group Ltd., an aluminum producer with RMB19.5 billion in EBITDA last year. We anticipate the company's FFO-to-debt ratio will weaken toward 20% in 2020 before improving to about 30% on demand and price recovery. However, visibility is low and downside risk exists. On April 27, 2020, S&P Global Ratings revised its outlook on China Hongqiao to stable from positive. At the same time, we affirmed our 'B+' long-term issuer credit rating on the company. The stable outlook reflects our view that China Hongqiao will maintain its competitive cost position and positive free operating cash flow over the next 12 months

...- Weaker demand and lower average selling price due to the COVID-19 pandemic will push up the leverage of China Hongqiao Group Ltd., an aluminum producer with RMB19.5 billion in EBITDA last year. - We anticipate the company's FFO-to-debt ratio will weaken toward 20% in 2020 before improving to about 30% on demand and price recovery. However, visibility is low and downside risk exists. - On April 27, 2020, S&P Global Ratings revised its outlook on China Hongqiao to stable from positive. At the same time, we affirmed our 'B+' long-term issuer credit rating on the company. - The stable outlook reflects our view that China Hongqiao will maintain its competitive cost position and positive free operating cash flow over the next 12 months and weather the economic downturn....

Research Update