2025 results and 1Q26 preannouncement in line with our expectations

In 2025, Tianshan Aluminum Group's revenue grew 5% YoY to Rmb29.5bn and attributable net profit rose 8.1% YoY to Rmb4.82bn. In 4Q25, attributable net profit rose 7.7% YoY and 17.6% QoQ to Rmb1.48bn. In 1Q26, the firm estimates that its attributable net profit rose 107.9% YoY to Rmb2.2bn.The firm's 2025 results and 1Q25 preannouncement are in line with our expectations.

The firm's earnings hit a record high in 2025 due to rising sales volume and prices of aluminum products. In 2025, its electrolytic aluminum output rose 0.8% YoY to 1.19mnt. Output of alumina rose 10.4% YoY to 2.52mnt. In 1Q26, partial production capacity of the firm's 1.4mnt aluminum energy efficiency improvement project was put into operation. Its electrolytic aluminum output and sales volume rose 10% YoY in 1Q26. In terms of prices, aluminum prices rose 4% YoY in 2025 and 17% YoY in 1Q26. The firm's electrolytic aluminum production cost fell 6.7% YoY, with earnings per tonne of aluminum increasing 41.9% YoY.

Asset structure improving; high dividend payout highlights investment value. In 2025, the firm's debt ratio fell 7.3ppt YoY to 45.4%, hitting a new low since its IPO; financial expenses fell 33.6% YoY; and net operating cash flow rose 54.3% YoY to more than Rmb8bn. In 2025, dividend payout ratio increased 11ppt YoY to 52.4%.

Trends to watch

Strengthening integrated presence in upstream and downstream sectors; the firm to benefit from rising aluminum prices and its ability to secure raw material and energy supply amid geopolitical conflicts.

Upstream: The Guangxi bauxite project is set to enter

substantial mining phase in 2026; the Guinea bauxite project is already in production and shipping ore back to China; in Indonesia, the firm has indirectly secured three bauxite mining rights, supporting a planned 2mnt/yr alumina capacity, with the Phase I project currently in design and site preparation.

Midstream: The firm aims to expand its electrolytic aluminum capacity to 1.4mnt/yr by 2026.

Downstream: The 160,000t/yr aluminum foil project at the Jiangyin base has commenced operations and is in the capacity ramp-up phase. This project mainly produces automotive batteries and consumer electronics.

We believe the firm has initially established an integrated presence along the industry chain. This, together with its supporting alumina facilities and proprietary power plants, may translate to strong cost advantages and risk resilience.

Financials and valuation

We keep our earnings forecasts largely unchanged. The stock is trading at 7.6x and 7.0x 2026e and 2027e P/E. We maintain an OUTPERFORM rating and our TP of Rmb24.94, implying 11x and 10.1x 2026e and 2027e P/E and offering 44% upside.

Risks

Sharp fluctuations in product prices; intensifying geopolitical conflicts; disappointing demand.