S&P Global Ratings upgraded China Hongqiao Group's (HKG:1378) long-term issuer credit rating to BB from BB- with a stable outlook, according to a Tuesday release.
The actions reflect the aluminum producer's improved financial standing, driven by strong cash generation and reduced debt, the rating agency said.
S&P expects the company to maintain its healthier profile, projecting a debt-to-EBITDA ratio of between 0.9x and 1x through 2026.
Strong aluminum demand, particularly from China's energy transition sectors, should modestly boost sales and keep the company's EBITDA margins at 28% to 29%, according to S&P.
These improvements contributed to better liquidity, which the company is expected to maintain in the next one to two years, S&P said.
However, the company continues to rely on short-term debt, amounting to 60% of total debt at the end of 2024.
Changes in the company's liquidity profile or debt-to-EBITDA ratio could trigger future rating actions, according to S&P.
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