China Merchants Securities has issued a research report initiating coverage on Chuangxin Industrial (02788) with a "Strong Buy" investment rating. The bank is optimistic about the company's profitability and growth potential, driven by its low-cost domestic production capacity and future capacity in Saudi Arabia. It anticipates that aluminum prices will remain favorable over the long term due to a tight supply-demand balance in the electrolytic aluminum market. The bank forecasts the company's net profit attributable to shareholders for 2025-2027 to be 2.387 billion yuan, 3.732 billion yuan, and 4.833 billion yuan, respectively, corresponding to a price-to-earnings (PE) ratio of 19.4, 12.4, and 9.6.
The main viewpoints from China Merchants Securities are outlined below. The company is a growing aluminum enterprise with an integrated and global operational footprint. It currently possesses an electrolytic aluminum production capacity of 788,100 tonnes and an alumina production capacity exceeding 3 million tonnes. Its electricity self-sufficiency rate is projected to reach 88% in 2024. The company is constructing the "Saudi Red Sea Aluminum Industry Chain Integrated Project" in Saudi Arabia. The main components of this project include 500,000 tonnes of electrolytic aluminum capacity and 500,000 tonnes of aluminum processing capacity. The company and its affiliates hold a combined 84% stake in the project, which is expected to significantly enhance the company's performance upon commencement of operations.
An integrated operational structure establishes a significant cost advantage, with industry-leading resource self-sufficiency. The company has built a highly self-sufficient industrial chain encompassing energy, alumina, and electrolytic aluminum. Its current electrolytic aluminum capacity stands at 788,100 tonnes per year, while its alumina capacity exceeds 3 million tonnes per year. The electricity self-sufficiency rate is projected at 88% for 2024, with an alumina self-sufficiency rate of 84%. Strategically, the company has established two major bases in Huolinguole, Inner Mongolia, and Binzhou, Shandong. Leveraging Inner Mongolia's abundant coal resources, it has built captive power plants with six sets of 330 MW thermal power units. The power generation cost is estimated at only 0.37 yuan per kilowatt-hour in 2024. Concurrently, the company is actively advancing its green transition, having constructed 1,750 MW of wind and solar power generation capacity. It plans to increase the proportion of renewable energy installed capacity to over 50% by the end of 2026. Due to its outstanding cost control capabilities, the company's management of per-ton aluminum cash costs ranks in the top 5% in China and the top 30% globally for 2024.
The Saudi project benefits from cost advantages and unlocks new growth potential. The company listed on the Main Board of The Stock Exchange of Hong Kong in November 2025, with the raised funds primarily allocated to the Saudi project. The "Saudi Red Sea Aluminum Industry Chain Integrated Project," located in the Yanbu Industrial City in Saudi Arabia, involves a total investment of approximately $1.835 billion. It is planned to have an annual production capacity of 500,000 tonnes of electrolytic aluminum and 500,000 tonnes of aluminum processing, with an expected operational start date in 2027. The project is jointly invested by the company and its affiliates through RSA Holding, with a combined stake of 84%. Saudi Arabia offers an industrial electricity price for high energy-consuming industries of only 3.2 US cents per kilowatt-hour, and the project benefits from incentives such as tax reductions and exemptions on equipment imports. Upon completion, the company will become one of the few Chinese enterprises with overseas electrolytic aluminum production capacity, possessing unique growth prospects.
The aluminum industry maintains a tight supply-demand balance, supporting sustained favorable market conditions. Domestic installed electrolytic aluminum capacity in China exceeds 45 million tonnes, with an operating rate of 98.3%, nearing the capacity ceiling and showing limited potential for significant increases. Overseas capacity expansion is progressing slowly due to factors like high power costs. Demand continues to be driven by emerging sectors such as new energy vehicles and photovoltaics, with a tight balance expected to persist through 2026. In December 2025, industry profit per tonne of aluminum reached 5,793 yuan, hitting a near 10-year high, with profits concentrating in the electrolytic aluminum segment of the value chain.
Potential risks include weaker-than-expected downstream demand, delays in the Saudi project timeline, fluctuations in bauxite prices, volatility in electrolytic aluminum prices, and changes in valuation and stock price.