Chuangxin’s net profit in 1H26 surged 1.7x YoY to RMB2.3bn, which is in line with the profit alert announced in Jul 2026 (RMB2.2-2.4bn). Key takeaways from analyst meeting include: (1) Wind and solar installed capacity of 1.75GW is expected to be completed by Oct 2026; (2) Saudi aluminium capacity construction is on good track and the project is expected to commence operation in 2Q27; (3) Coal mining capex is expected to be RMB4bn which will be spent in 2027-29. We maintain our positive stance on Chuangxin given its strong capacity growth (Saudi project) and substantial cost reduction potential in China, despite the rebound of gearing ratio due to the acquisition of coal mining business and on-going capex needed. We slightly fine-tune our 2026-28 earnings forecasts by -1% to +6%. Our TP is slightly revised up to HK$32.4 (previously HK$32), based on unchanged 13x 2026E P/E (20% premium over our target multiple for China Hongqiao (1378 HK, BUY) to reflect Chuangxin’s higher volume growth and higher potential of cost reduction).
1H26 results highlights. Revenue grew 32% YoY to RMB11.5bn, driven by 21%/34%/366% YoY increase in aluminium / alumina & alumina hydroxide / other revenue. The substantial growth of other revenue was driven by the increase in external power sales (~RMB0.45/kWh). Gross margin for aluminium business sharply expanded 20ppt YoY to 43%, taking the blended gross margin up 15ppt YoY to 34.7%. As at end-June 2026, net debt to equity ratio increased to 100% (from 56% by end-2025), largely due to the completion of Tongliao Smart Mining (coal mining unit) acquisition.
Key takeaways from analyst meeting:
Wind and solar project: As of Jun 2026, 1.15GW of wind and solar capacity was installed. Chuangxin expects the total capacity of 1.75GW will be completed by Oct. The power generation cost will be only RMB0.10-0.18/kWh, much lower than that of coal-fired power (RMB0.31-0.35/kWh).
Saudi project: The capacity construction work has been smooth and unaffected by conflict in the region. Steel structure was installed in Apr while reduction cells and equipment were installed in Jul. Phase 1 (500kt annual aluminium capacity) is expected to commence operation in 2Q27, which will contribute output of ~250kt in 2027.
Capex: Chuangxin guided full-year capex of ~RMB3.4bn, comprising RMB1.2bn for Saudi project (already spent in 1H26), RMB1.6bn for wind & solar power installation as well as RMB500-600mn of recurring capex. In 2027-29, capex will mainly be the RMB4bn spending on coal mining capacity (RMB1.3bn per year).