CICC: Maintains NANSHAN AL INTL (02610) outperforming industry rating, lowers target price to HKD 34.81.

CICC released a research report stating that considering the decline in alumina prices, it has cut the net profit forecast for NANSHAN AL INTL (02610) for 2026/2027 by 50%/32% to $203 million/$309 million. The current stock price corresponds to a P/E of 11/7x for 2026/2027. The firm maintains an "outperform" rating. In light of the profit decline, the firm has lowered the target price by 47% to HKD 34.81, which corresponds to a P/E of 14/9x for 2026/2027, indicating a 25% upside relative to the current stock price. CICC's key points are as follows: 1H26 performance below the firm's expectations The company announced its 1H26 results: operating revenue of $415 million, down 30.5% year-on-year; net profit attributable to the parent company of $63 million, down 74.8% year-on-year. The company's 1H26 performance was below the firm's expectations due to the decline in alumina prices. In 1H26, alumina sales volume increased while prices decreased, leading to a significant year-on-year decline in performance In terms of price, the average alumina price in 1H26 dropped from $529/ton to $320/ton, a decrease of 39.5% year-on-year. Alumina sales volume increased from 1.127 million tons to 1.296 million tons, an increase of 15.0% year-on-year. In terms of cost, the average cost of alumina in 1H26 was $270/ton, an increase of about $9 compared to 2025, mainly due to underutilization of capacity and rising bauxite prices. In terms of gross profit, affected by the combination of price decline and rising costs, gross profit in 1H26 was down 79% year-on-year; the gross profit margin was 16%, down 35 percentage points year-on-year. Issuing interim dividends, maintaining a 20% payout to shareholders The company has declared an interim dividend of HKD 0.16 per share, amounting to a total dividend of $12.661 million, corresponding to a payout ratio of approximately 20%, consistent with the dividend ratio in 2025. Expanding electrolytic aluminum capacity to create a second growth curve Leveraging its established annual alumina production capacity of 4 million tons at its Indonesian base, the company plans to extend its reach into the downstream industry chain and is set to develop electrolytic aluminum and related raw materials and supporting businesses. In 1H26, the company announced the launch of the first phase of its electrolytic aluminum project, with an annual output of 250,000 tons and an investment of approximately $440 million, with a construction period of about two years. It also plans to add a new electrolytic aluminum project with an annual output of 500,000 tons in the medium to long term, marking the companys formal transition to an integrated producer of alumina and electrolytic aluminum. Exploring opportunities along the entire industry chain to achieve aluminum integration layout According to the announcement, the company plans to further extend upstream and downstream at an appropriate time, promoting the construction of a complete aluminum industry chain in the Indonesian park that aligns upstream resourcesmidstream smeltingdownstream processing, replicating the model of the Shandong Longkou park, maximizing internal synergy effects, and enhancing operational efficiency and risk resilience.