Recent data from the Hong Kong Stock Exchange reveals that major shareholders of CHINA XLX FERT (01866) have been actively accumulating shares. In late May, Pioneer Top Holdings Limited, controlled by Chairman Liu Xingxu, executed five consecutive purchases, acquiring a total of 4.094 million shares for approximately HK$43 million, raising its stake to 32.70%.
Management continued the buying spree into June. On June 4th, Executive Director Yan Yunhua purchased 600,000 shares in the secondary market for nearly HK$6 million. The following day, Yan Yunhua bought an additional 312,000 shares for about HK$3.05 million.
Since the second quarter of 2025, following the smooth commencement of operations at the Jiujiang Phase II project and the gradual realization of its production capacity and cost advantages, CHINA XLX FERT's stock price has established a clear upward trajectory. In May, buoyed by positive profit alert expectations for the first quarter, the share price hit a record intraday high of HK$12.98. A short-term technical correction occurred in mid-to-late May after earnings were announced, but this did not disrupt the underlying upward trend.
The signal conveyed by the major shareholders' persistent buying at this juncture is one of confidence in the trend's continuation. Their decision to add positions at elevated price levels indicates their unwavering confidence in the medium-to-long-term fundamentals, undeterred by short-term fluctuations. This signal is often more potent than buying at market bottoms.
First-quarter results for 2026 show that CHINA XLX FERT achieved revenue of RMB 6.822 billion, a 17% year-on-year increase. Net profit attributable to shareholders reached RMB 299.6 million, surging 52% year-on-year, while gross profit was RMB 1.279 billion, up 53%. With profit growth tripling revenue growth and a significant expansion in gross margin, this indicates that growth is not merely volume-driven but reflects a substantial unlocking of "profit elasticity."
This round of profit growth stems from a confluence of favorable factors across pricing, costs, and structure. On the pricing front, geopolitical tensions in the Middle East have pushed up international urea prices, propelling the global fertilizer industry into its strongest upcycle in recent years. On the cost side, moderate coal prices have provided foundational support for profit recovery. Regarding structure and capacity, the commissioning of new capacity at Jiujiang Phase II has helped dilute costs, while an increased proportion of high-efficiency fertilizers and expansion into overseas markets have created a diversified portfolio that effectively hedges against the cyclical volatility of single urea products.
Furthermore, policies aimed at curbing excessive internal competition are accelerating the exit of outdated capacity in the fertilizer industry. For small and medium-sized producers with high costs and outdated technology, rising barriers to energy-saving upgrades and tightening approvals are rapidly closing their window for survival. However, for leading companies like CHINA XLX FERT, whose production costs are over 10% below the industry average and boast a high proportion of advanced process capacity, these policies are effectively helping it "clear the battlefield."
While an industry inflection point is approaching, not all companies are positioned to capture the benefits. CHINA XLX FERT's confidence stems from four core competitive advantages it has built: "Cost-Efficiency," "Extensive Reach," "Scale," and "Innovation."
Cost-Efficiency
Leveraging coal resources and an integrated industrial chain across its three major bases in Henan, Xinjiang, and Jiangxi, CHINA XLX FERT's production costs are approximately 10% lower than the industry average. During 2025, when the fertilizer industry faced widespread losses and generally low product prices, this cost advantage directly translated into a urea gross margin exceeding 20% for the company. According to the company's plans, once capacity is fully ramped up by 2028, this cost advantage is expected to widen further. By then, while peers may still struggle to break even, CHINA XLX FERT will have built a thicker safety buffer on the foundation of consecutive profitable years.
Extensive Reach
The company's sales network now spans all 31 provincial-level administrative regions in China, with approximately 7,000 newly added distributors, achieving a network coverage rate of 91%. This deeply penetrated distribution network is not merely about product placement; it is a powerful tool for continuously capturing market share from competitors. Each new distributor serves as an extension of the CHINA XLX FERT brand and service capabilities, enabling the company's full product line—from basic urea to specialized fertilizers like black urea and nutrient-loss control fertilizer—to quickly reach end-user farmers.
Scale
According to the company's "Three Ones" plan, CHINA XLX FERT aims for a total fertilizer capacity of 14 million tons by 2028, comprising 8 million tons of urea and 6 million tons of compound fertilizer. Compared to peers such as Hualu Hengsheng (urea capacity ~3.07 million tons) and Yuntianhua (urea capacity ~2.9 million tons), CHINA XLX FERT holds a significant scale advantage in the urea segment. Currently, the Xinxiang base's chemical new materials project has entered trial production with all indicators running smoothly.
The Xinxiang base is scheduled for commissioning in the third quarter, with new urea capacity potentially exceeding market expectations at 1.05 million tons. Construction of the Zhundong Phase I project is progressing as planned, with completion expected before the end of this year. The Guangxi major project Phase I is planned for commissioning in the third quarter of next year. The Guangxi project will fill the gap for new nitrogen fertilizer capacity in the Guangdong-Guangxi region, leverage the Pinglu Canal to improve transportation efficiency and reduce costs, and aid the company's expansion into Southeast Asian markets. The Zhundong project is expected to further strengthen the company's low-cost competitiveness by leveraging regional resource advantages.
Innovation
The company's black urea (humic acid urea) holds a market share exceeding 50%, with humic acid-based products achieving a gross margin of 25%, making it a flagship high-efficiency fertilizer product. Specialized fertilizers like nutrient-loss control fertilizer and water-soluble fertilizer are also seeing volume growth, collectively elevating the value-added level of the company's product portfolio. Beyond its core fertilizer business, the company is expanding into new materials like polyoxymethylene and electronic gases, cultivating a second growth curve.
In retrospect, the major shareholders' consecutive share purchases are underpinned by a complete logical chain: accelerated industry consolidation, a nearing cyclical inflection point, a period of concentrated capacity release amplifying scale effects, and a moat built on cost, distribution, and product advantages. When major shareholders choose to continue adding positions after substantial share price appreciation, they are not betting on short-term price differentials. Instead, they are wagering on the long-term narrative of CHINA XLX FERT's transition from a "cyclical stock" to a "value growth stock."
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