Guosen Securities released a research report stating that through multi-angle valuation and considering Chuangxin Industrial's (02788) high earnings growth over the next five years, it assigns the company a PE valuation of 12-15x for 2026. This yields a reasonable valuation range of RMB 32.5-40.7 billion, corresponding to a market capitalization of RMB 67.5-84.4 billion, representing a potential premium of 24%-55% over the current market cap. The firm initiated coverage with an "Outperform" rating. Guosen Securities' main views are as follows:
The company is a producer of alumina and electrolytic aluminum, with electrolytic aluminum accounting for 90% of its revenue. Established in 2012, it has built a 6330MW coal-fired captive power plant and 788,000 tons of electrolytic aluminum capacity in the Huolin River area of Eastern Inner Mongolia over the past decade, alongside a 3 million ton alumina capacity in Binzhou, Shandong. It listed on the Hong Kong Stock Exchange in November 2025.
The company's alumina capacity is advantageously located near Binzhou Port and Huanghua Port, resulting in low inland transportation costs for imported bauxite. Compared to inland capacities in regions like Henan and Shanxi, this logistics advantage translates to an alumina cost benefit of over RMB 200 per ton. Its electrolytic aluminum capacity is situated in the Huolin River area of Eastern Inner Mongolia, utilizing local low-calorific-value lignite for power generation and aluminum smelting. This lignite has low calorific value and a small sales radius, leading to lower absolute prices and less volatility compared to market coal; the company's recent captive power generation cost is only RMB 0.3 per kWh, tax inclusive. Compared to the concentrated electrolytic aluminum capacity in Xinjiang, the company is closer to both alumina production areas and major aluminum consumption markets, resulting in lower transportation costs for both alumina inbound and finished aluminum products outbound compared to Xinjiang-based producers. The company's net profit margin has consistently led the industry.
Following the grid connection of the 1750MW green power project in Eastern Inner Mongolia, the cost advantage from coal power will transition to an advantage from green power, simultaneously achieving the dual objectives of low carbon emissions and cost reduction. The 1750MW wind and solar power project is expected to be fully grid-connected by 2026, with a generation cost of RMB 0.10-0.18 per kWh, significantly lower than the coal-fired captive power plant. Once fully connected, the annual green power generation will exceed 5.5 billion kWh, accounting for 50% of the company's electrolytic aluminum electricity consumption. The company's power mix will then be half low-cost green power and half low-cost lignite-based power, reducing the comprehensive electricity cost to below RMB 0.25 per kWh, tax inclusive. This will substantially lower the company's electrolytic aluminum costs, making its cost advantage even more prominent.
The company will construct a 500,000-ton electrolytic aluminum facility in Saudi Arabia. Leveraging its strengths in downstream processing, it has successfully secured an aluminum industry chain project in Saudi Arabia. The first phase of 500,000 tons of electrolytic aluminum is expected to commence operation around 2027. Electricity costs in Saudi Arabia are low, with tariffs for energy-intensive industries at only 3.2 US cents per kWh, equivalent to the cost of coal-fired captive power in China's Xinjiang region. This gives the electrolytic aluminum project a significant cost advantage, providing the company with long-term growth potential and making it a rare growth stock within the electrolytic aluminum sector.
Earnings forecast: The company's electrolytic aluminum output is continuously increasing, and grid-connected green power will further reduce costs, allowing it to fully benefit from the profit elasticity brought by rising aluminum prices. Net profit attributable to the parent company for 2025-2027 is forecasted to be RMB 3.10/5.03/6.74 billion, with annual growth rates of 51%/63%/34% respectively. Earnings per share are projected to be RMB 1.49/2.43/3.25.
Risk warnings: Risks include a decline in aluminum prices; potential delays in project construction schedules; risks of deteriorating industry supply-demand dynamics due to rapid increases in overseas electrolytic aluminum capacity; and risks associated with rising prices of bauxite, coal, and prebaked anodes.
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