The rating on China Hongqiao Group Ltd. reflects the company's high concentration risk, short operating record, and key man risk. In addition, China Hongqiao is likely to generate negative free operating cash flow in 2013 due to its still high capital expenditure. The company's low cost position and proximity to its customer base, and the good long-term demand prospects for aluminum products in China partly offset these weaknesses. We assess China Hongqiao's business risk profile as "fair" and its financial risk profile as "significant." We view China Hongqiao's concentration risk as high because its customer base, product range, supply source, and diversification are limited. In the first half of 2012, more than 71% of the company's revenue came from sales
