Guolian Minsheng has initiated coverage on CHUANGXIN IND (02788) with a "Buy" rating, highlighting the company's integrated energy-alumina-aluminum layout. The firm's aluminum production capacity is strategically located in Inner Mongolia, where energy costs are advantageous. With the gradual integration of green electricity into the grid, the company's aluminum production costs are expected to decline further. Additionally, CHUANGXIN IND is expanding its aluminum capacity in Saudi Arabia, positioning itself as a rare player in the industry with incremental aluminum production growth. The aluminum sector remains in a tight supply-demand balance, supporting upward price trends.

Key insights from Guolian Minsheng include:

**Integrated Aluminum Production and Saudi Expansion** CHUANGXIN IND operates an integrated alumina and aluminum smelting business, with domestic capacities of 788,000 tons of aluminum and 3.2 million tons of alumina as of mid-December 2025, achieving over 100% self-sufficiency in alumina. The company is expanding overseas with a planned 500,000-ton aluminum industry project in Saudi Arabia, which is expected to drive future earnings growth. IPO proceeds are primarily allocated to the Saudi project and domestic green energy initiatives.

**Cost Advantages in Inner Mongolia** The company’s aluminum production facilities are based in Huolinguole, Inner Mongolia, while its alumina capacity is concentrated in Binzhou, Shandong. With self-sufficient coal-fired power plants leveraging Inner Mongolia’s abundant coal resources, CHUANGXIN IND benefits from lower electricity costs. The transition to green energy, including wind power projects (costing RMB 0.1–0.18 per kWh), is expected to further enhance its cost competitiveness.

**Strong Financial Performance** Despite relying on imported bauxite, CHUANGXIN IND has maintained high utilization rates in its aluminum production lines. From 2022 to the first five months of 2025, alumina output reached 710,000/1.55 million/1.54 million/660,000 tons, primarily for internal use. Aluminum production remained near full capacity, with 744,000/758,000/755,000/311,000 tons sold mainly as molten aluminum to its largest customer, Chuangxin New Materials. Supported by supply-side reforms and resilient aluminum prices, the company reported a 9.8% YoY revenue increase in 2024 and a 104.8% surge in net profit. In the first five months of 2025, revenue rose 22.6% YoY amid slightly higher aluminum prices.

**Saudi Project to Drive Growth** In March 2025, CHUANGXIN IND partnered with Chuangxin Group and Chuangxin New Materials to invest in a Saudi Red Sea aluminum project, holding a 33.6% stake. The first phase targets 500,000 tons of aluminum and alloy capacity, catering to Saudi and Western markets, with an expected 18–24-month construction period and production start in 2027. Saudi Arabia’s low-cost natural gas will further reduce energy expenses, boosting profitability. Potential future equity injections from Chuangxin Group could increase the project’s contribution to earnings.

**Risks Include:** Weaker-than-expected aluminum demand, unexpected declines in alumina prices, and project delays.