We maintain the “buy” investment rating of Xingfa Aluminum (the “Company”) and the target price of HK$11.73. Our target price is equivalent to 4.9 times/3.7 times/2.9 times the price-earnings ratio from 2023 to 2025.

We expect Xingfa Aluminum's new energy vehicle aluminum extrusion sales to record rapid growth in 2023. The penetration rate of new energy vehicles in China began to accelerate in 2023, and NEV production in the first quarter of 2023 already accounted for 29.3% of total passenger vehicle production.

We expect that the company's sales of aluminum extruded materials for NEVs will greatly benefit from the rapid development of the NEV industry and become the company's main source of growth in the next three years.

We believe that the competitive advantage of Xingfa Aluminum has been underestimated by investors. The company has shown a huge competitive advantage in cost control and marketing, which is the main reason why sales of the company's aluminum extruded materials for construction continued to grow even in an unfavorable environment. We believe the company's growth prospects are still good.

Catalysts: rapid growth in sales of new energy vehicles; recovery of the domestic real estate market.

Risks: The development of aluminum extrusions for vehicles falls short of expectations; fierce competition from other aluminum extrusion manufacturers; the domestic real estate market continues to weaken.