The three main industries drive certainty, and China Sunac (01907) enhances shareholder returns through "dividends + repurchases".

The conflict between the US and Iran has escalated again, the situation in the Hormuz Strait continues to be blocked, impacting the price nerves of the chemical industry sector. As a global leader in integrated coke and chemical industry, China Xuyang (01907) has attracted high market attention. In fact, the coke industry has reached a cyclical bottom, with a continuous decline since April this year. Most stocks have fallen significantly, and China Xuyang's valuation has fallen into a "gold pit", with a PB value of only 0.6 times. The cyclical fluctuations in the industry belong to the performance cycle, and performance is highly sensitive to price, as seen in the lithium battery industry, which hit bottom in the first half of last year and then saw prices continue to rise in the second half, leading to a double impact on performance and valuation, with most stocks doubling in market value. It is understood that during the valuation correction cycle, China Xuyang has boosted market confidence through "buybacks + dividends". The company has set a buyback plan every year, and since June this year, it has cumulatively repurchased 14 times, repurchasing 25.438 million shares, with a total repurchase amount of 5.340.36 billion Hong Kong dollars. At the same time, the company is also stepping up the promotion of new energy businesses, forming a strategic drive with coke and chemical as the basic foundation and new energy as the growth engine. Recently, the prices of chemical-related products have risen significantly due to the US-Iran conflict. The logic of energy substitution has brought upward expectations for the price of coke, bringing a lot of heat to the company. With the valuation at a low point, what is the rate of value betting? Price inflection points reshape the fundamentals, with three pillars of industry driving certainty Cyclical industries are very sensitive to prices, and prices often determine the direction of industry performance and valuation. For China Xuyang, the inflection point in prices is reshaping its fundamentals. First, China Xuyang has a solid foundation, starting with coke, forming three unique chemical industry chains of carbon materials, alcohols, and aromatic hydrocarbons. In addition, Xuyang Holdings strategically invested in Tianjin Binhai Energy & Development in 2022 and entered the new energy lithium battery negative material industry. Through a share transfer in April 2026, it increased its stake in Tianjin Binhai Energy & Development by 14.5%, further strengthening the layout of this industry. The company has a scale advantage in three major industries. By 2025, the company operates 19 coke production lines with an annual operating capacity of 23.7 million tons and 56 chemical production lines with an annual operating capacity of 6.2 million tons. In these two major industries, including coke, coke crude benzene, caprolactam, and high-purity hydrogen, among other products, the company holds a leading position in market share. In addition, Tianjin Binhai Energy & Development, together with Xuyang Holdings, has a total capacity of 10,000 tons of integrated artificial graphite negative electrode materials and is currently building a 200,000-ton integrated negative electrode material project, which is expected to be fully operational by December 2026, and shipping 130,000 tons this year. First, let's look at coke, which is one of China Xuyang's basic business pillars, contributing more than 30% of revenue and showing resilient performance. The period from 2022 to 2025 is a period of cyclical adjustment for the coke industry, with prices continuing to bottom out, and the industry entering a period of double decline in both volume and price. However, the company, with its leading position, has seen double-digit compound growth in sales volume, continuously increasing its market share. At the same time, the company's cost control places its coke gross profit per ton at the industry's leading level. The company's coke and coking business has maintained its profitability. Although the company's revenue was affected by prices in 2025, its business gross profit increased by 10.4% and gross profit margin rose to 12.4%. This is mainly due to the company's unique coal blending technology on the production side and multiple advantages in supply and transportation, creating room for profitability. However, the industry's low point has passed, with coke prices rising for four consecutive quarters since the second half of last year, and there is still upward momentum under the energy substitution logic. The industry's "volume-price" recovery brings growth expectations for this business, which has a high proportion of self-owned production capacity and great performance flexibility. Among its operating production capacity, self-owned coke has an annual designated production capacity of 17.4 million tons, accounting for 73%, with operating parks located in Hebei Dingzhou and Xingtai, Shandong Yuncheng, Inner Mongolia Hohhot, Jiangxi Pingxiang, and Indonesia, with an additional 1.6 million tons of capacity under construction in Indonesia, with an annual sales rate exceeding 90%. Next is the chemical industry, the largest contributor to China Xuyang's revenue, accounting for more than 40%. Starting from coking, this business has formed three paths of carbon materials, alcohols, and aromatic hydrocarbons. The company's self-owned capacity reaches 5.42 million tons, accounting for 87.42%, with self-developed projects located in Xingtai, Dingzhou, Cangzhou, Leting, Yuncheng, Dongming, and Hohhot parks. In the carbon materials industry chain, the company has a production capacity of about 1 million tons of coal tar, 500,000 tons of coal tar pitch, 180,000 tons of industrial naphthalene, and 150,000 tons of carbon black and other chemical products. In the alcohol-ammonia industry chain, it has a production capacity of 600,000 tons of methanol, 900,000 tons of synthetic ammonia, and 5,000 tons of aminoalcohol. In the aromatic hydrocarbon industry chain, it has a production capacity of 860,000 tons of crude benzene hydrogenation, 300,000 tons of styrene, and 810,000 tons of caprolactam. The prices of chemical business products are linked to coke, but the US-Iran conflict has continued to disrupt supply and demand, causing significant price fluctuations. For example, in the first quarter of 2026, the price of methanol rose by more than 45%, fell by 26% in the second quarter, but rose by over 10% in the third quarter. Similarly, for pure benzene, the trend has been similar to methanol, but with greater elasticity, rising more than 60% in the first quarter, falling in the second quarter, and rising again by nearly 20% in the third quarter. The company's chemical business is expected to drive performance growth with high certainty in 2026. The business's incremental performance comes mainly from three sources: first, the increase in performance brought by the rise in prices of products such as methanol and caprolactam; second, the increase in performance brought by scale expansion, such as the independent research and development of a 50,000-ton capacity production line for caprolactam directly prepared for hexanediamine in the first half of 2026; and third, as the country's second-largest and the largest supplier of high-purity hydrogen in the Beijing-Tianjin-Hebei region, the production line of five 34-ton/day high-purity hydrogen preparation lines will release performance. In addition, the company provides operational management services and procurement trading to third-party independent coke producers and chemical product manufacturers, consolidating its leading position and industry competitive advantages. In 2025, it provided operational management services to six coke producers and two fine chemical product manufacturers. However, the revenue contribution from operational management and trade business is low, with little price elasticity and not a significant impact on the overall business. Finally, the new energy industry is the third major pillar of the company. Since strategically investing in Tianjin Binhai Energy & Development, the company has entered the lithium battery negative material industry and deployed a 300,000-ton integrated negative material project in Shangdu County, Ulanqab City, Inner Mongolia, along with a complementary 580MW source-grid-storage green energy project. The negative material project is expected to be fully operational by the end of this year, and the source-grid-storage green energy project is expected to be fully operational in November, both of which will contribute to the company's performance. With solid fundamentals, three pillars of industry driving certainty, and generous dividends and buybacks for shareholders, the company has been well-received by major investment banks. For example, the Changjiang research report believes that the company's stable coke foundation and unique cost advantage provide strong profit resilience, and the profit of coal chemical industry has an opportunity for improvement, relying on the cost advantage of the industrial chain which is expected to benefit greatly, short-term profit expansion of coal chemical industry + medium-term energy security strategic drive to enhance valuation. In general, China Xuyang is at an inflection point in its fundamentals, with the coke industry gradually recovering in the business cycle, energy substitution prices continuing to rise quarterly, the chemical sector being affected by the US-Iran conflict with significant short-term fluctuations, but overall prices are still significantly higher than last year. The business growth and profit certainty are high, and the new energy business is expected to contribute to performance next year when it becomes fully operational. The company values shareholder returns, generously providing dividends and buybacks to continuously increase shareholder returns. The company's stock price has recently bottomed out and rebounded, with net purchases of 8.034 million shares through the Shanghai-Hong Kong Stock Connect in the past five trading days. Large funds have quietly positioned themselves as buyers, with the fundamentals turning and driving valuation into an upward cycle, offering a high value betting rate.