创新实业：Capacity growth in Saudi Arabia + superb costadvantage on low green energy cost in China-20260204

Investment Rating - The report initiates coverage of Chuangxin Industries with a BUY rating and a target price (TP) of HK$32, representing a 28% upside from the current price of HK$25 [3][8]. Core Insights - Chuangxin Industries presents a unique growth opportunity in the aluminium sector, driven by capacity expansion in Saudi Arabia and a significant cost advantage due to low green energy costs in China [1]. - The ongoing development of wind and solar power sources is expected to further reduce electricity costs by 2026-2027, enhancing profitability [1]. - The tight supply in the aluminium market is anticipated to support higher aluminium prices, with a 1% increase in aluminium prices projected to boost Chuangxin's earnings by 2.5% in 2026 [1]. Financial Summary - Revenue is projected to grow from RMB 13,815 million in FY23A to RMB 20,091 million in FY27E, with a notable increase of 29.1% in FY26E [2]. - Adjusted net profit is expected to rise significantly from RMB 1,003.6 million in FY23A to RMB 4,819.4 million in FY27E, reflecting strong growth potential [2]. - The earnings per share (EPS) is forecasted to increase from RMB 0.67 in FY23A to RMB 2.32 in FY27E, indicating robust profitability growth [2]. Capacity Expansion - Chuangxin currently operates 788 kt of electrolytic aluminium capacity in China and is expanding with a 500 kt project in Saudi Arabia, expected to be completed by Q2 2027 [7][14][16]. - The company has a high self-sufficiency rate for electricity, with plans to achieve over 50% of its power supply from green energy by 2027, significantly reducing costs [25][34][37]. Cost Structure - The current electricity cost for Chuangxin is RMB 0.33/kWh, lower than the industry average of RMB 0.40/kWh, with expectations to reduce this further to below RMB 0.20/kWh through green energy initiatives [25][37]. - The company’s captive coal-fired power plants provide 100% electricity self-sufficiency for aluminium smelting, enhancing its cost leadership in the sector [24][25]. Market Position - Chuangxin is positioned as a significant player in the aluminium market, being the 12th largest electrolytic aluminium producer in China as of 2024 [7]. - The company has established a strong customer base, with a significant portion of its revenue derived from major clients in the non-ferrous metal processing sector [39][41].