Key takeaway

The sharp increase in AI server shipments, along with rising power and voltage requirements, is significantly driving demand growth for aluminum electrolytic capacitors, solid-liquid hybrid aluminum electrolytic capacitors, supercapacitors, and MLPCs, thereby boosting demand for high-purity aluminum, a raw material used in electrode foil. Meanwhile, semiconductor demand is growing. Localization of high-purity aluminum sputtering targets and their raw material supply is significantly increasing demand for high-purity aluminum above 5N5. The company accounts for about 30% of global high-purity aluminum capacity, ranking first worldwide, with leading technology. It is the only manufacturer that has mastered both the three-layer electrolysis method and the segregation process and can mass-produce 5N–6N ultra-high-purity aluminum, and it will significantly benefit from rapid growth in AI capacitors and semiconductor aluminum sputtering targets.

Rising AI server power drives rapid growth in high-purity aluminum for capacitors

AI server power supply systems rely on multiple aluminumcontaining capacitors. The primary power supply (PSU) uses snap-in capacitors. The secondary power supply side widely uses hybrid aluminum electrolytic capacitors. MLPC capacitors are used near the chip side. Supercapacitors together with BBU (battery backup unit) form a hybrid energy storage architecture. As rack power and voltage increase, both the number of capacitors configured and the parameter requirements rise. Taking aluminum electrolytic capacitors as an example, the GB200 is estimated to use 180 units per rack, while the Rubin VR200 is estimated to use 480 units, representing more than a doubling. As rack power increases, the energy storage system needs to evolve from traditional UPS batteries to a hybrid solution of supercapacitors and lithium batteries to meet microsecond-level transient power response requirements. Starting from GB300, supercapacitors shift from optional components to standard hardware. Configuration per unit will continue to expand as voltage and power increase. Hybrid aluminum electrolytic capacitors provide mid-frequency filtering and voltage stabilization on the secondary power side. Therefore, their usage scales linearly with the increase in total rack power. MLPC is mainly deployed on the chip side and undertakes high- frequency decoupling and transient response. Therefore, its usage is highly correlated with AI chip power consumption and packaging density. All four types of capacitors above require aluminum electrode foil. As the power of AI cabinets increases, the consumption of aluminum electrode foil will see rapid growth. Upstream demand for high- purity aluminum will also increase accordingly and is expected to achieve simultaneous volume and price growth.

High- purity aluminum demand for sputtering targets: Three driving forces

Steady growth in mature semiconductor process nodes and rapid growth in advanced packaging have driven demand for high- purity aluminum sputtering targets. Domestic high- purity aluminum sputtering target companies have already entered the supply chains of leading chip manufacturers both in China and overseas. The localization rate is gradually increasing, further accelerating demand growth for domestically produced high - purity aluminum sputtering targets. At the same time, domestically produced high- purity aluminum raw materials for sputtering targets have begun batch supply to domestic target manufacturers, gradually replacing imported high- purity aluminum raw materials. This creates three drivers of demand, and the market growth rate for domestically produced 5N5+ high- purity aluminum is considerable.

The company’s high- purity aluminum: Clear advantages in both scale and technology.

Global annual production capacity of high- purity aluminum is about 250–300kt and is mainly concentrated in China. The company ranks first globally with output of 92kt. In addition, the company has outstanding technological capabilities in high- purity aluminum. It is currently the only manufacturer in China that has mastered both the three- layer electrolysis method and the segregation process and can mass- produce 5N– 6N ultra- high- purity aluminum. With the development of AI capacitors, the supply- demand gap for highpurity aluminum is expected to continue widening in the future. Both volume and prices are likely to rise. Meanwhile, the triple demand drivers for ultra- high- purity aluminum raw materials used in sputtering targets open incremental opportunities in the high- end market. As the leader in both market scale and technology in the high- purity aluminum industry, the company will benefit significantly.

Earnings forecast

The company is currently at the intersection of three catalysts: Earnings turnaround, new capacity release, and expanding AI- driven demand. Gross margin in 1Q26 jumped to 20.70% from 8.98% for FY25 (the highest single - quarter level in the past five years). Net profit increased by 18.92% YoY, providing preliminary confirmation of the earnings inflection point. The company’s revenue is expected to reach RMB8.446bn, RMB9.06bn, and RMB9.58bn in 2026–2028E, respectively, with corresponding earnings of RMB1.202bn, RMB1.814bn, and RMB2.25bn. The corresponding P/E multiples are 21x, 14x, and 11x, respectively. We assign a “Buy” rating.

Risks:

Risk of cyclical aluminum price fluctuations in the alloy and aluminum products business. The company’s alloy products (RMB2.966bn) and aluminum products (RMB0.698bn) together account for about 46% of total revenue, essentially a cyclical aluminum smelting and processing business whose profitability is highly positively correlated with electrolytic aluminum prices. In 2025, the gross margin of alloy products was 6.27%, and the gross margin of aluminum products was 10.72%, with profit elasticity highly sensitive to aluminum prices. If the global supply-demand structure of electrolytic aluminum reverses or macroeconomic weakness leads to a sustained decline in aluminum prices, profits from this segment will shrink significantly and drag down the company’s overall performance.

Risk of rising energy costs. Electrolytic aluminum consumes about 13,000 kWh of electricity per ton, while the three-layer electrolytic process for high-purity aluminum consumes about 16,000 kWh per ton, making both highly energy-intensive and extremely sensitive to electricity prices; if electricity prices fluctuate and energy costs rise, the company’s costs will increase and profit realization will be affected.

Risk of downstream AI server demand falling short of expectations. The company’s incremental growth logic from high-purity aluminum → electronic aluminum foil → electrode foil is highly dependent on a surge in capacitor demand from AI servers and the rollout of the 800V HVDC architecture. If Nvidia delays its deployment pace due to infrastructure constraints, or if the growth rate of AI computing power investment slows, the related demand pull-through effect will be realized later than expected.