Core Viewpoint - Shandong Hongchuang Aluminum Industry Holdings Co., Ltd. is responding to the Shenzhen Stock Exchange's inquiry regarding its asset purchase application, highlighting the valuation methods and results of its assets, which indicate significant appreciation in value. Asset Valuation Summary - The transaction employs both asset-based and income approaches for asset valuation, with the asset-based approach concluding a total equity value of 63.518 billion yuan, reflecting an appreciation of 20.778 billion yuan and a growth rate of 48.62% [1][2]. - The assessed assets include 43 subsidiaries, with 39 wholly-owned, 2 controlled, and 2 affiliated companies. Valuation for wholly-owned and controlling subsidiaries is based on net asset values multiplied by ownership percentages, while affiliated companies are valued based on their reported net assets [1][2]. - The primary sources of asset appreciation are inventory, fixed assets, construction in progress, and land use rights. Inventory valuation increases are attributed to profit considerations in semi-finished products, while fixed asset appreciation is due to rising replacement costs and longer economic lifespans compared to accounting depreciation [1][2][3]. - The transaction's price-to-earnings ratio is 3.49, lower than the industry average of 10.61 and comparable transaction average of 18.35, while the price-to-book ratio is 1.49, similar to the industry average of 1.52 [1][2]. Detailed Asset Assessment - The valuation of major asset categories under the asset-based approach shows significant increases, with total asset appreciation amounting to 19.81395 billion yuan, representing 95.36% of the total asset appreciation [1][2][3]. - Specific asset categories and their valuation methods include: - **Inventory**: Valued using replacement cost method, resulting in an increase of 800.49 million yuan [1][2][3]. - **Fixed Assets**: Valued using replacement cost method, leading to an increase of 6.7102857 billion yuan [1][2][3]. - **Land Use Rights**: Valued using market comparison and cost approach, resulting in an increase of 3.6277185 billion yuan [1][2][3]. - **Construction in Progress**: Valued considering reasonable financing costs, contributing to overall asset appreciation [1][2][3]. Subsidiary Performance - The subsidiaries engaged in electrolytic aluminum, alumina, and aluminum deep processing hold significant operational assets, leading to higher valuation increases compared to trading or under-construction subsidiaries [1][2][3]. - The top ten subsidiaries account for 89.21% of the total asset appreciation, with a combined increase of 18.536 billion yuan [1][2][3].

Core Viewpoint - The report highlights that Zhongfu Industrial (中孚实业) has shown significant growth in Q2 2025 despite a slight decline in revenue, driven by improved profitability from aluminum production and strategic acquisitions [1][2][3]. Financial Performance - In H1 2025, Zhongfu Industrial achieved revenue of 10.57 billion yuan, a year-on-year decrease of 3.8%, while net profit attributable to shareholders reached 710 million yuan, up 59.6% year-on-year [2]. - For Q2 2025, the company reported revenue of 5.55 billion yuan, down 4.5% year-on-year but up 10.6% quarter-on-quarter, with a net profit of 480 million yuan, reflecting a 19.4% increase year-on-year and a 107.2% increase quarter-on-quarter [2]. Price and Cost Dynamics - The average aluminum price in H1 2025 was 20,321 yuan/ton, up 2.7% year-on-year, while the price of alumina decreased by 0.3% to 3,518 yuan/ton [3]. - In Q2 2025, the aluminum price was 20,201 yuan/ton, down 1.2% quarter-on-quarter, and alumina prices fell significantly by 22.5% to 3,072 yuan/ton [3]. Profitability Metrics - The gross margin for H1 2025 was 11.7%, an increase of 1.4 percentage points year-on-year, while the net margin was 5.9%, up 1.6 percentage points year-on-year [3]. - In Q2 2025, the gross margin improved to 14.5%, a quarter-on-quarter increase of 5.9 percentage points, and the net margin reached 7.9%, up 4.2 percentage points quarter-on-quarter [3]. Strategic Initiatives - The company completed the acquisition of a 24% stake in Zhongfu Aluminum, increasing its electrolytic aluminum capacity to 750,000 tons, enhancing earnings flexibility [3][5]. - The company plans to maintain a cash dividend payout ratio of no less than 60% from 2025 to 2027 as part of its shareholder return strategy [4]. Future Outlook - The reduction in alumina prices and the increase in electrolytic aluminum capacity are expected to significantly enhance profitability in the coming years [5]. - The company anticipates achieving net profits of 1.83 billion yuan, 2.46 billion yuan, and 2.73 billion yuan for 2025, 2026, and 2027, respectively, with corresponding price-to-earnings ratios of 12, 9, and 8 times [5].

Core Viewpoint - Shandong Hongchuang Aluminum Industry Holdings Co., Ltd. is undergoing an asset evaluation process for a share issuance to acquire assets, with a focus on the asset-based and income approaches for valuation, resulting in a significant increase in asset value [1][2]. Asset Evaluation Summary - The asset-based approach and income approach were used for the evaluation, with the asset-based approach concluding a total equity value of 63.518 billion yuan, an increase of 20.778 billion yuan, representing a growth rate of 48.62% [1][2]. - The evaluation identified 43 subsidiaries, with 39 wholly-owned, 2 controlled, and 2 affiliated companies, and assessed their net asset values based on ownership percentages [1][3]. - The primary sources of asset value increase were identified as inventory, fixed assets, construction in progress, and land use rights, with specific reasons for inventory valuation increases linked to profit considerations in semi-finished products [1][7]. Financial Metrics - The price-to-earnings (P/E) ratio for the target assets was reported at 3.49 times, significantly lower than the industry average of 10.61 times and comparable transaction average of 18.35 times; the price-to-book (P/B) ratio was 1.49 times, which is comparable to the industry average of 1.52 times [2][3]. Evaluation Methodology - The evaluation of inventory was based on the replacement cost method, with specific methodologies applied to different asset categories, including fixed assets and land use rights [8][10]. - Fixed assets were evaluated using the replacement cost method, with increases attributed to the economic lifespan exceeding accounting depreciation periods and rising construction costs [10][14]. - Land use rights were evaluated using market comparison, benchmark land price adjustment, and cost approach methods, reflecting an increase in value due to improved investment environments and infrastructure development in the region [24][25]. Specific Asset Increases - The total net asset evaluation increase was reported at 20.778 billion yuan, with significant contributions from fixed assets, land use rights, inventory, and construction in progress, accounting for 95.36% of the total increase [8][9]. - Specific increases included: - Inventory: 800 million yuan increase, 2.30% growth rate - Fixed assets: 6.71 billion yuan increase, 26.16% growth rate - Equipment: 8.68 billion yuan increase, 59.23% growth rate - Land use rights: 3.63 billion yuan increase, 65.83% growth rate [9][10][23].

Core Viewpoint - Hongchuang Holdings plans to acquire 100% equity of Shandong Hongtu Industrial Co., Ltd. from Shandong Weiqiao Aluminum & Electricity Co., Ltd. for a transaction price of 63.518 billion yuan, marking a significant asset restructuring that does not constitute a reverse listing [2][6]. Group 1: Transaction Details - The transaction price for acquiring Shandong Hongtu Industrial is set at 63.518 billion yuan [2]. - The total assets of the target company are projected to be approximately 1,050.43 billion yuan, while the listed company’s total assets are expected to be around 31.27 billion yuan, indicating a significant increase in asset scale [4]. - The transaction will involve issuing approximately 11.895 billion shares at a price of 5.34 yuan per share, resulting in a total share capital of about 13.031 billion shares post-transaction [9]. Group 2: Financial Impact - Post-transaction, total assets of Hongchuang Holdings will increase from 31.27 billion yuan to 1080.26 billion yuan, and net profit is expected to turn from a loss of 0.69 billion yuan to a profit of 18.082 billion yuan [9]. - The basic earnings per share will improve from -0.06 yuan to 1.39 yuan, reflecting a substantial enhancement in profitability [9]. - The target company, Hongtu Industrial, is projected to achieve an operating income of 149.289 billion yuan and a net profit of 18.182 billion yuan in 2024 [8]. Group 3: Strategic Implications - The acquisition will enable Hongchuang Holdings to transition from a single aluminum deep processing business to a comprehensive company integrating electrolytic aluminum, alumina, and aluminum deep processing, enhancing the overall competitiveness in the aluminum industry [6][10]. - The restructuring aims to eliminate related party transactions and industry competition with the controlling shareholder, thereby improving operational efficiency [10]. - The transaction is expected to elevate the company's status from a regional competitor to a global leader in the aluminum manufacturing sector [10].