Guosen: First coverage of CHUANGXIN IND (02788) with "outperform the market" rating Overseas projects boost high capacity growth

Guosen released a research report stating that, considering CHUANGXIN IND's (02788) high growth performance in the next 5 years from multiple perspectives, the company is given a 12-15 times PE valuation for the year 2026, resulting in a reasonable valuation range of 32.5-40.7 Chinese Yuan, corresponding to a market value of 67.5-84.4 billion Yuan. This represents a premium space of 24%-55% compared to the current market value. The company is first covered with an "outperform" rating. Key points from Guosen: Background: The company is an aluminum oxide and electrolytic aluminum production enterprise, with electrolytic aluminum revenue accounting for 90%. The company was established in 2012 and has built 6,330 MW of coal-fired self-owned generators and 788,000 tons of electrolytic aluminum capacity in Hohhot, Mongolia Danglin River over the past decade. It has also built a 3 million ton aluminum oxide capacity in Binzhou, Shandong, and was listed on the Hong Kong Stock Exchange in November 2025. Geographically advantageous production capacity, industry-leading profitability: The company's aluminum oxide production capacity is close to Binzhou Port and Huanghua Port, with low inland transportation costs for imported bauxite, resulting in a cost advantage of over 200 yuan per ton compared to inland capacity in Henan and Shanxi. The company's electrolytic aluminum production capacity is located in the Hohhot, Mongolia Danglin River area, using low-calorific value brown coal for aluminum smelting. The recent self-generated electricity cost for the company is only 0.3 yuan per kilowatt-hour tax-inclusive. The company's net profit margin has always been in a leading position in the industry. After the 1,750 MW green electricity is connected to the grid, the coal-fired cost advantage will be transformed into a green electricity cost advantage, achieving both low carbon and cost reduction goals: The company's 1,750 MW wind and photovoltaic project is expected to be fully connected to the grid in 2026, with electricity costs ranging from 0.10-0.18 yuan per kilowatt-hour, much lower than coal-fired self-owned power plants. After full grid connection, the annual green electricity output will exceed 5.5 billion kilowatt-hours, accounting for 50% of the company's electrolytic aluminum electricity consumption. The company's electricity cost structure will be half from low-cost green electricity and half from low-cost brown coal-fired electricity, reducing the electricity cost to below 0.25 yuan per kilowatt-hour, and significantly reducing the cost of electrolytic aluminum, highlighting the cost advantage. The company will build a 500,000 ton electrolytic aluminum project in Saudi Arabia: Leveraging the downstream processing industry advantages, the company has successfully launched the aluminum industry chain project in Saudi Arabia, with an initial target of 500,000 tons of electrolytic aluminum expected to be put into operation around 2027. With low electricity costs in Saudi Arabia, electricity costs for high-energy-consuming industries are only 3.2 cents per kilowatt-hour, equivalent to the cost of coal-fired self-generator in Xinjiang, bringing significant cost advantages to the electrolytic aluminum project and providing the company with long-term growth space, making it a scarce growth target in the electrolytic aluminum industry. Profit forecast: With the continued increase in the company's electrolytic aluminum production, further cost reduction from green grid connection, and full advantage of profit elasticity brought by the rising aluminum price, it is estimated that the net profit attributable to the parent company will be 31.0/50.3/67.4 billion Yuan from 2025 to 2027, with profit growth rates of 51%/63%/34% respectively. Earnings per share are projected to be 1.49/2.43/3.25 Yuan. Risk warning: Risks of aluminum price decline; risks of project construction progress not meeting expectations; risks of rapid increase in foreign electrolytic aluminum leading to changes in industry supply and demand patterns; risks of rising prices of bauxite, coal, and prebaked anodes.