Innovative industrial (02788) launches IPO: the electrolytic aluminum market continues to be prosperous, and the integrated leader has abundant growth momentum.

According to reports, Innovation Industrial Group Limited (referred to as "Innovation Industrial", stock code: 02788.HK) is now launching its IPO, with the subscription period from November 14th to November 19th, and plans to officially list on the main board of the Hong Kong Stock Exchange on November 24th. The IPO is co-sponsored by CICC and Huatai International. The company plans to globally issue 500 million shares, with a price range of HK$10.18-10.99 per share, raising approximately HK$54.95 billion at the highest fundraising amount, corresponding to a valuation range of HK$203.6-219.8 billion. Innovation Industrial (02788) focuses on the high value-added segments of alumina refining and aluminum smelting in the upstream of the aluminum industry chain. Its produced aluminum is a key basic material, widely used in various fields such as 3C electronics, lightweight automobiles, green energy, transportation, industrial materials, and construction, after downstream processing into various aluminum alloys. Currently, the aluminum industry is showing a clear imbalance between supply and demand: the explosive demand for aluminum consumption in areas such as new energy vehicles and photovoltaic energy storage is driving a high growth in aluminum consumption, while global electrolytic aluminum production capacity is growing weakly due to factors such as environmental policies, and the supply-demand situation is expected to remain tight in the long term. As an important player in the upstream of the aluminum industry chain, Innovation Industrial's fundamentals continue to improve, and its integrated layout of the entire industry chain continues to consolidate, expected to continue benefiting from the high prosperity cycle of aluminum and bringing long-term substantial value returns to investors. Integrated layout of the entire industry chain builds a solid foundation for steady growth in performance Performance is the most direct reflection of a company's value. From 2022 to 2024, Innovation Industrial's operating income increased from RMB 13.49 billion to RMB 15.163 billion, with a compound annual growth rate of 6.0%; the improvement in profit capability was even more significant, with net profit increasing substantially from RMB 913 million to RMB 2.63 billion over the same period, with a compound annual growth rate exceeding 60%, demonstrating strong growth momentum. This impressive performance is a result of Innovation Industrial's long-term efforts to construct an integrated ecosystem for the electrolytic aluminum industry chain. Through the synergistic complementarity of "energy-alumina refining-electrolytic aluminum smelting", the company has not only achieved high self-sufficiency in key raw materials and energy but also significantly enhanced its risk resistance during industry cycle fluctuations. The diversification of the company's revenue structure is the most evident reflection of the effectiveness of this strategy: from January to May 2022 to 2025, the proportion of alumina and related products in the company's total revenue increased from 2.0% to 21.1%. By further improving the layout of the electrolytic aluminum industry chain, the company achieved a self-sufficiency rate of approximately 84% in alumina by 2024, effectively avoiding the risk of price fluctuations in raw materials and fully capturing potential profits in the alumina upturn cycle, enhancing the company's overall profitability. In terms of energy, it is understood that the company's electrolytic aluminum production base in Inner Mongolia is equipped with self-owned coal-fired power plants, which constitute a solid foundation for its energy security. Building on this foundation, the company is actively optimizing its energy structure and transitioning towards greenification. In July 2023, the company initiated the construction of a green energy generation project with a total installed capacity of 510 megawatts (400 megawatts of wind power generation and 110 megawatts of CECEP Solar Energy generation). As of the final feasible date, the wind power generation station has been put into operation and connected to the grid, and most of the capacity of the CECEP Solar Energy generation station has been installed and part of it has been put into operation and connected to the grid, with the remaining capacity expected to be put into operation and connected to the grid by the end of December 2026. It is expected that after grid connection, the company's proportion of green electricity will increase significantly. Thanks to this robust energy system, the company's self-sufficiency rate in electricity has consistently remained at a high level in the industry. In 2024, its self-sufficiency rate was approximately 88%, far higher than the industry average of around 57% as indicated in the CRU report. As of the five months ending on May 31, 2025, its electricity self-sufficiency rate remained at a strong level of approximately 87%. According to CRU's report, based on 2024 production volume, Innovation Industrial's electrolytic aluminum smelting plant in Holingol, Inner Mongolia, is the fourth largest electrolytic aluminum production base in northern China and the twelfth largest electrolytic aluminum producer in China, demonstrating solid scale and industry position. Significant cost reduction and efficiency improvement results in evident long-term operational resilience In addition to the strategic integrated layout of the entire industry chain, Innovation Industrial's outstanding performance in cost control and refined operations constitutes another solid pillar of its fundamentals. Looking at various financial data, the company's performance in cost control and operations surpasses industry averages in multiple indicators, providing stable support for its profit quality. As a high energy consumption industry, the level of electricity consumption directly affects cost competitiveness for electrolytic aluminum. Through continuous technological innovation, Innovation Industrial has controlled the electricity consumption of its electrolytic aluminum smelting in 2024 to 13,366 kilowatt-hours per ton, lower than the industry average of 13,670.0 kilowatt-hours per ton. With the company's ongoing technological renovation projects, the company expects to further reduce the comprehensive electricity consumption of electrolytic aluminum smelting to 13,290.0 kilowatt-hours per ton by the end of 2025, further enhancing its cost advantage. Benefitting from highly automated production and continuous refined management, the company's annual per capita output of electrolytic aluminum reaches 590 to 670 tons, 2.2 to 2.6 times the industry average. The decrease in fixed and labor costs per unit product provides additional optimization space for the company's profit margin. In 2024, the company's cash cost per ton of aluminum was approximately RMB 15,112, which, according to the CRU report, is significantly lower than the average cash cost per ton of aluminum in China (approximately RMB 17,700). The company's ability to manage the cash cost per ton of aluminum ranks among the top 5% of all electrolytic aluminum smelting companies in China and among the top 30% globally, demonstrating significant leading advantages brought by cost reduction and efficiency improvement. Reflected in the financial statements, from 2022 to 2024, the proportion of sales costs to total income continued to decrease, from 84.9% to 71.8%; in the first five months of 2025, financial expenses decreased by 28.4% year-on-year, synchronously enhancing financial health and operational stability, laying a solid foundation for the company's long-term development. It is reported that the company's cost of green electricity generation is significantly lower than that of thermal power. As the proportion of green electricity increases, the company's electricity costs continuously decrease, further enhancing the company's profit capabilities. High industry prosperity continues to grow, opening up new growth space through overseas expansion Currently, the electrolytic aluminum industry is entering a long-term cycle of "expanding demand, limited supply". Driven by strong demand in areas such as new energy vehicles, photovoltaic energy storage, and power electronics, global demand for electrolytic aluminum is showing structural growth, while the supply side is facing weak growth due to capacity constraints domestically and internationally, leading to a sustained tightening of the supply-demand situation in the industry. In terms of demand structure, the growth drivers for aluminum consumption are becoming more diversified. In the transportation sector, the amount of aluminum used in a single new energy vehicle far exceeds that of a traditional fuel vehicle, becoming the core engine driving the growth of aluminum demand; the construction of green energy facilities such as photovoltaic brackets and cables further boosts aluminum consumption; and in the power sector, the trend of substituting copper with aluminum has become a significant trend in the wire and cable industry, leading to continuous growth in aluminum demand in areas such as power cables and transformers. In addition, the emergence of low-altitude economy has opened up new growth space for aluminum consumption, such as eVTOL (electric vertical takeoff and landing aircraft). At the same time, on the supply side, under the global trend of decarbonization and environmental protection, developed countries such as Europe and the United States are generally showing a trend of reducing electrolytic aluminum smelting capacity. In China, the Ministry of Industry and Information Technology's "Aluminum Capacity Replacement Plan" stipulates an annual production capacity limit of 45 million tons for electrolytic aluminum. By May 31, 2025, the capacity utilization rate has reached a historic high of 96%, and it is estimated that by 2034, the annual demand gap in the market will exceed one million tons. The imbalanced supply-demand situation provides solid support for aluminum prices and industry profitability levels. Facing growing overseas demand and domestic capacity bottlenecks, overseas layout brings new growth opportunities. Innovation Industrial actively responds to the "Belt and Road" initiative and prospectively lays out a comprehensive electrolytic aluminum project in Saudi Arabia with a capacity of 500,000 tons. According to the CRU report, from 2025 to 2028, the compound annual growth rate of electrolytic aluminum demand in the Middle East region is expected to be approximately 4.6%. At the same time, the abundant oil and natural gas reserves in the Middle East can provide cheap and stable energy supply for electrolytic aluminum production. The industrial electricity cost in Saudi Arabia is far lower than the average industrial electricity cost in China during non-peak hours, giving the project a significant energy cost advantage. Looking ahead, against the background of sustained global aluminum consumption growth and expanding supply-demand gap, the high prosperity of the electrolytic aluminum industry is expected to continue. With its deepening integrated layout of the entire industry chain, leading cost control advantages within the industry, and the second growth curve opened by the Saudi project, Innovation Industrial has built a strong competitive moat. In the future, the company is expected to fully benefit from the long-term upward cycle of aluminum prices, driving both performance and valuation to soar.