Innovation Global Industries Holdings Limited ("Innovation Global") has recently submitted its second prospectus filing to the Hong Kong Stock Exchange, with CICC and Huatai International serving as joint sponsors. According to the prospectus, the Hong Kong IPO proceeds will be used for: 1) expanding overseas capacity, including construction of aluminum smelting facilities and purchase and installation of production equipment; 2) green energy projects, including construction of green energy power stations and purchase and installation of equipment; 3) working capital and other general corporate purposes.
This prospectus not only exposes visible risks such as declining profitability quality and excessive customer dependence, but also reflects systemic concerns of "financial fragility-business imbalance-aggressive strategy." Compared to Nanshan AL INTL (2610.HK), which has already established a solid foothold in Southeast Asia, Innovation Global's international expansion remains in the "blueprint stage," with its IPO valuation logic relying more on long-term projections while short-term risks cannot be ignored.
**Dual Decline in Gross and Net Profit Margins in First Five Months of 2025, Alumina Gross Margin Only 2.2%**
Innovation Global focuses on the upstream aluminum industry chain, specifically alumina refining and aluminum electrolysis. The aluminum industry chain primarily includes upstream aluminum production and downstream aluminum alloy processing. Upstream aluminum production mainly comprises three stages: bauxite mining, alumina refining, and aluminum electrolysis. According to CRU reports, based on value-added per ton of aluminum, refining and smelting are the highest value-added segments in the aluminum industry chain.
As a company focused on upstream aluminum industry chain, Innovation Global's core businesses—alumina refining and aluminum electrolysis—should benefit from high value-added industry chain dividends. However, financial data for the first five months of 2025 shows warning signs. For 2022-2024 and the first five months of 2025, Innovation Global's operating revenue was RMB 13.49 billion, RMB 13.82 billion, RMB 15.16 billion, and RMB 7.21 billion respectively, with a compound annual growth rate of 6.0% for 2022-2024. Net profits were RMB 881 million, RMB 1.00 billion, RMB 2.06 billion, and RMB 756 million respectively. While the company showed significant growth in the first three years, profitability quality declined markedly in the first five months of 2025—gross margin fell from 28.2% in 2024 to 19.9%, and net profit margin dropped from 17.3% to 11.9%.
The core issue lies in the dual impact of soaring raw material costs and product price volatility. In the first five months of 2025, 75.4% of the company's cost of sales came from raw materials, with bauxite being the key driver. According to CRU data, average bauxite prices in China rose from approximately RMB 528/ton in the same period of 2024 to RMB 720/ton in the first five months of 2025, an increase of 36.4%. As the core raw material for alumina production, rising bauxite prices directly transmitted to upstream and downstream costs, causing differentiated impacts on various business lines: aluminum electrolysis business gross margin fell from 27.4% in the same period of 2024 to 23.7%, as aluminum market prices rose slightly overall, making cost pressure relatively manageable; however, alumina and other products gross margin plummeted from 23.9% to 2.2%. Beyond cost-side pressure, alumina market prices fell from highs after February 2025, with the company's average alumina selling price declining 16.4% from RMB 3,512.5/ton in 2024 to RMB 2,938.2/ton. The dual squeeze of "rising costs, falling selling prices" nearly eliminated profit margins.
Additionally, unbalanced product structure further intensified profitability pressure. Although aluminum electrolysis revenue proportion fell from 95.5% in 2022 to 76.6% in the first five months of 2025, it remains the absolute revenue pillar. However, the company's market share in China's aluminum electrolysis market is only 1.8% (top five companies collectively account for 46%), facing intense pressure from leading enterprises. While alumina and other products increased their proportion to 21.1%, their gross margin was only 2.2% in the first five months of 2025, far below aluminum electrolysis's 23.7%, unable to offset aluminum price volatility risks.
**Related Party Innovation New Materials Contributed Nearly 80% of Revenue in 2024, Business Independence Questionable**
The prospectus shows that in 2023, 2024, and the first five months of 2025, the company's revenue from related party Innovation New Materials (an enterprise controlled by the controlling shareholder) was RMB 10.89 billion, RMB 11.61 billion, and RMB 4.32 billion respectively, accounting for 78.8%, 76.6%, and 59.8% of total revenue in the same periods. Innovation Global stated in the prospectus that selling most of its aluminum liquid to Innovation New Materials and its subsidiaries does not indicate over-dependence on the controlling shareholder and its close associates, and is beneficial to the company and its shareholders. Additionally, although Innovation New Materials is the company's largest customer in 2023, 2024, and the five months ended May 31, 2025, the company still maintains independent customer channels. However, in 2023, 2024, and the first five months of 2025, revenue from customers other than related parties was only RMB 1.28 billion, RMB 1.52 billion, and RMB 1.44 billion respectively, accounting for only 9.3%, 10.0%, and 19.9% of total revenue in the same periods.
Innovation New Materials focuses on downstream aluminum alloy processing, and its demand is significantly affected by end-industry cycles. If it reduces purchases in the future, Innovation Global will face a "no orders available" dilemma. More concerning is that bilateral transactions rely on cost advantages of "short-distance aluminum liquid transportation." Once cooperation terms change, the company may be forced to accept lower prices, further eroding profits.
**Innovation Global vs Nanshan AL INTL: Lagging International Expansion, Questionable Listing Motives**
Nanshan AL INTL, a subsidiary of Nanshan Aluminum, focuses on Southeast Asian business and went public in March 2025. Compared to Nanshan AL INTL's mature overseas expansion, Innovation Global's internationalization strategy appears more like a "paper blueprint."
Nanshan AL INTL has been expanding in Indonesia since 2019 and has established a solid market position in Southeast Asia: by alumina design capacity, it ranked first in Southeast Asia in 2023 with an actual capacity market share of 34.9%. It has built a vertical industry chain in Indonesia comprising "fully automated production workshops + captive power plants + coal-to-gas plants + deep-water ports" and enjoys tax reduction policies in Indonesia's Karawang Special Economic Zone for up to 22 years.
In contrast, Innovation Global has no prior overseas business experience, with international expansion remaining only at the planning stage: part of the proposed fundraising will be used to expand overseas capacity, including construction of aluminum smelting facilities and purchase and installation of production equipment. Specifically, the company invests in Saudi Arabia's 500,000-ton aluminum electrolysis comprehensive project through a joint venture, with an estimated total investment of approximately HKD 2.18 billion. Construction is planned to begin before the end of 2026, with a 24-month construction period, with production starting at the earliest by the end of 2028. The project faces multiple uncertainties including engineering delays, construction cost overruns, and difficulties in building local teams, with extremely high trial-and-error costs for the first project.
Furthermore, Nanshan AL INTL's listing was a natural choice following its overseas business development to a certain stage. According to Nanshan AL INTL's global offering prospectus, revenue grew from USD 173 million to USD 678 million from fiscal 2021-2023, with a compound growth rate of 98%. Net profit increased from USD 39.71 million to USD 174 million, with a compound growth rate of 109%. In the first nine months of fiscal 2024, revenue and net profit were USD 683 million and USD 266 million respectively, both exceeding full-year 2023 figures, supported by solid performance.
Innovation Global's listing timing appears somewhat hasty. The company's profitability indicators are highly volatile (gross margin and net profit margin in the first five months of 2025 declined significantly compared to 2024), short-term debt pressure is prominent, and international expansion has not yet begun. Against the backdrop of competitors like Nanshan AL INTL having already gained capital support through Hong Kong listings, Innovation Global's Hong Kong IPO launch at this time may involve "follow-the-trend listing" suspicions, and whether it possesses mature listing conditions requires prudent assessment.
**General Manager Cao Yong's 2024 Compensation Reached RMB 7.73 Million, Diverging from Performance Growth**
Another noteworthy detail is the divergence between executive compensation and performance. General Manager Cao Yong's compensation increased from RMB 3.90 million in 2022 to RMB 7.73 million in 2024, with a compound growth rate of 41.5%. In the first five months of 2025, it was RMB 3.86 million, which if annualized could exceed RMB 8 million. During the same period, the company's net profit margin fell from 17.3% to 11.9%. The inversion of "declining performance, rising compensation" reflects potentially unreasonable incentive mechanisms that may harm shareholder interests in the long term.