"The first stock of Indonesian alumina concept": Nanshan Aluminum International entered the Hong Kong Stock Exchange

Under the current great changes in the world unseen in a century, the pace of Chinese enterprises "going global" has accelerated, and more and more enterprises have begun to emerge in the international market, showing strong competitiveness and influence. Especially in Southeast Asia, with the deepening of the "Belt and Road" initiative, the economic and trade cooperation between China and Southeast Asian countries has become increasingly close, providing a broad space for the development of Chinese enterprises and bringing development opportunities to countries along the route.

As the largest economy in Southeast Asia, Indonesia's total GDP will reach US$1.37 trillion in 2023, and it is also the only country in Southeast Asia with an economic aggregate exceeding the US$1 trillion mark. Coupled with the huge demographic dividend brought by the total population of 270 million and the median age of the population aged 30, Indonesia has become one of the hottest investment destinations.

A small number of forward-looking enterprises have laid out here early, and have now entered the harvest period. On September 26, Nanshan Aluminium International, a subsidiary of Nanshan Aluminum, officially submitted a statement to the Hong Kong Stock Exchange to be listed on the main board of Hong Kong.

As one of the top three alumina producers in Southeast Asia, what are the highlights of Nanshan Aluminium International?

1. Behind the high growth is win-win cooperation

In 2019, Nanshan Aluminium International officially started the construction of alumina in Indonesia with PT.BAI as the operating entity, and has rapidly grown into one of the leading aluminum companies in Southeast Asia in just a few years, which is inseparable from the two advantages of the Indonesian market.

First of all, Indonesia is blessed with unique resource endowments.

As we all know, bauxite is one of the core raw materials for alumina production, and sufficient bauxite supply is the prerequisite for the rapid expansion of alumina production. By the end of 2023, Indonesia had proven bauxite reserves of about 1 billion tonnes, ranking sixth in the world and second in Southeast Asia.

Coal is the core energy source in the production of alumina, and it is also one of the important advantages of the Indonesian market. As of 2023, Indonesia has confirmed coal reserves of about 37 billion tons, leading Southeast Asia and ranking sixth in the world.

In addition, Indonesia's rapid economic development in recent years, especially the continuous advancement of infrastructure construction and industrialization, has directly increased the demand for aluminum products such as alumina. At the same time, the Indonesian government actively promotes industrial transformation and upgrading, and encourages the development of downstream alumina and electrolytic aluminum industry chains. BAI is one of the models of downstream business to boost the economy", which undoubtedly injected a "booster" into the participation of foreign investors, including Chinese companies, in local aluminum industry projects.

In addition to Indonesia's comparative advantage in terms of resources, Nanshan Aluminium International's parent company, Nanshan Aluminium, is firmly pursuing its internationalization strategy, which is also adjusted in response to changes in the domestic market.

China is the world's largest producer of alumina and electrolytic aluminum, and has a number of enterprises with rich operational experience and technical reserves in the production of aluminum products. However, under the guidance of the dual carbon goal, the supply-side reform of the electrolytic aluminum industry has added a ceiling to the industry's production capacity, which is equivalent to adding a limit to alumina from the demand side.

Domestic production capacity needs to be transferred, and Indonesia needs this force to help it upgrade its industry, and Nanshan Aluminium International has achieved leapfrog growth by relying on mature technology and complete industrial operation experience.

According to the prospectus, from fiscal year 2021 to fiscal year 2023, the company's operating income will be 173 million, 467 million, and 678 million (unit: US dollars) respectively, with a compound growth rate of 98% in the current period. The good performance growth is mainly driven by the continuous increase in the company's alumina production, which increased from 0.47 million tons to 1.9 million tons from fiscal 2021 to fiscal 2023, with a compound growth rate of 100.2%.

Profitability was also impressive. From fiscal year 2021 to fiscal year 2023, the company's net profit increased from $39.71 million to $174 million, with a compound growth rate of 109.04% during the period.

In the context of the global economic pressure in the past few years, Nanshan Aluminium International has been able to deliver such a brilliant report card, which once again verifies the correctness of its overseas decision.

Second, the four advantages to build the core competitiveness

Choosing the right battlefield is important, but if it doesn't have strong strength, Nanshan Aluminium International won't quickly become a giant in just a few years.

1) Strong shareholder advantage

Nanshan Aluminium International's parent company, Nanshan Aluminum, is an A-share listed company with a market value of about 50 billion yuan, which has been deeply involved in the aluminum industry for more than 20 years, and has the advantages of the whole industry chain, covering thermoelectric, alumina, electrolytic aluminum, casting, aluminum profile/hot rolling, cold rolling, foil rolling, scrap aluminum recycling (recycling), etc., and deep industry know-how helps Nanshan Aluminium International Business Development.

Press Metal作为东南亚地区领先的综合性铝业公司,与Nanshan Aluminium International订立了为期10年的氧化铝承购安排。 Press Metal氧化铝年需求量超过2百万吨,有能力消耗Nanshan Aluminium International的绝大部分产能,有助于公司业绩稳健增长。

Redstone Alumina International Pte. Ltd.'s controlling shareholder, the Santony family, has been operating several bauxite mines in Indonesia for many years, and has a strong local raw material sourcing network, which can provide Nanshan Aluminium International with stable high-grade bauxite resources.

2) Unique location advantages

Transportation is a non-negligible part of the entire alumina production process. Nanshan Aluminium International production and supporting facilities are located on the southeast side of Bintan Island, Riau Islands, Indonesia, at the gateway between the Pacific Ocean and the India Ocean, holding the main traffic artery of the Strait of Malacca, and can accommodate large ships up to 35,000 tons to load cargo. Compared to alumina producers in other countries, which often rely on bauxite imports from Australia and Guinea, Nanshan Aluminium International's location advantage allows it to obtain high-grade bauxite directly in Indonesia, greatly reducing the transportation distance, helping to improve transportation convenience and reduce transportation costs.

This also makes "raw materials ready to use" and "alumina ready to be produced and shipped" to become the characteristic labels of Nanshan Aluminium International.

3) Perfect supporting facilities

In addition to building its own wharf, Nanshan Aluminium International has also built its own power plant and reservoir to achieve self-sufficiency in water and electricity. This ensures the stability of daily production and operation, while also reducing production costs and maintaining sufficient profit margins.

4) Cost advantage

Bauxite and coal are the two core materials for alumina production, and their price changes are very important to the impact of enterprise production costs.

There is an oversupply of bauxite in Indonesia, the price is relatively low, and the high-grade bauxite used by Nanshan Aluminium International contains higher aluminum content and lower impurities, which is conducive to the more efficient extraction of aluminum elements, and the high-grade bauxite is suitable for low-temperature Bayer method, and its roasting temperature is about 90 degrees lower than that of standard Bayer method, which can save energy consumption, simplify the production process and reduce production costs.

Coal is also regulated by the Indonesian government, which requires at least 25% of the total annual production to be sold in the domestic market, which is conducive to the low price of coal.

Combined with the low transportation costs due to the short transportation distances and the low operating costs due to the self-sufficiency of water and electricity, Nanshan Aluminium International achieved an industry-leading cost advantage, which ultimately translated into strong profitability for the company.

From fiscal year 2021 to fiscal year 2023, the company's gross profit margin was 25.9%, 24.0%, and 29.2%, respectively, and even reached 42.2% in the first half of 2024, far exceeding the industry average. At the same time, from fiscal year 2021 to fiscal year 2023, the company's net profit increased from $39.71 million to $174 million, with a compound growth rate of 109.04% during the period.

(数据来源:Nanshan Aluminium International招股说明书)

It can be seen that from production, transportation to sales and delivery, Nanshan Aluminium International has a perfect layout, which makes it firmly occupy the leading position in the alumina market in Southeast Asia.

At the same time, in the face of growing market demand, Nanshan Aluminium International is also constantly expanding its supply capacity and raising its own growth ceiling.

On the basis of the current 2 million ton design, the company plans to double to 4 million tons to achieve stronger economies of scale, thereby further reducing unit costs and improving profitability. It is reported that the new alumina production project is expected to increase the production capacity by 1 million tons in the second half of 2025 and the second half of 2026, which brings more room for the company's performance growth in the next two or three years.

III. Conclusion

Nanshan Aluminium International had an early insight into the trend of China's aluminum product production capacity to Indonesia, and actively took advantage of the trend to enjoy the early market dividends, and established its leading position in the Southeast Asian market by virtue of this first-mover advantage. This achievement is not only due to the rapid growth of Indonesia's economy and the optimization of the market environment, but also the inevitable result of Nanshan Aluminium International's deep strength and strategic layout.

Of course, the huge opportunities in the Indonesian market will naturally attract more and more companies, and the competition of Indonesian aluminum products will gradually increase in the future, but Nanshan Aluminium International, which has a first-mover advantage, has established certain advantages in production, transportation and sales, which not only provides it with a sustained market leading position, but also lays a solid foundation for the company's future growth.

If Nanshan Aluminium International successfully lands on the Hong Kong Stock Exchange in the future, its brand influence and financial strength will be significantly enhanced, which will provide strong support for it to expand its production capacity and explore new markets.