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On September 26, Nanshan Aluminium International filed an application with the Hong Kong Stock Exchange. The five-year capital planning of the Nanshan Group finally ushered in new progress.

The development of the electric vehicle market and renewable energy has kept the aluminum oxide price running high. Nanshan Aluminium International, which saw revenue grow by over 40% in the first half of the year, is taking advantage of the capital market sprint. As a 'veteran' in the capital market, the controlling shareholder Nanshan Aluminium clearly is not unprepared. As an aluminum oxide manufacturer, Nanshan Aluminium International relies on 'making a profit by earning the price difference' as an intermediary, which means that the company's ability to control the upstream and downstream industry chains to some extent determines whether the company can operate normally.

The main battlefield of Nanshan Aluminium International is in Indonesia. As early as November 2019, the company bound itself with the Indonesian mine owner Santony family upstream, providing raw materials to Nanshan Aluminium International. At the same time, the MKU company controlled by the Santony family is also a shareholder of Nanshan Aluminium International. On the other hand, Nanshan Aluminium International bound itself with the largest aluminum industry company in Southeast Asia, Press Metal, downstream, and signed a ten-year arrangement for purchasing aluminum oxide. Press Metal is also an important shareholder of Nanshan Aluminium International. Before listing in Hong Kong, Nanshan Aluminium International declared a dividend of 0.26 billion US dollars, benefiting both upstream and downstream shareholders.

In June 2023, the Indonesian government implemented a ban on bauxite exports, which four months later, Nanshan Aluminium announced the spin-off and listing of Nanshan Aluminium International to expand financing channels and alleviate financial pressure, expand production capacity. Also, the second-generation Song Jianbo-led Nanshan Group will gain another listed company.

Aligning equity with the upstream and downstream Southeast Asian aluminum industry giants to enjoy the capital feast together

With abundant bauxite resources, Indonesia was once one of the main importing countries of bauxite ores in China. Nanshan Aluminium has set its sights on Indonesia, gradually becoming one of the top three aluminum oxide producers in Southeast Asia.

On the evening of September 26, Shandong Nanshan Aluminum Industry announced that Shandong Nanshan Aluminum Industry International formally submitted a prospectus to the Hong Kong Stock Exchange. The controlling subsidiary of Shandong Nanshan Aluminum Industry, PT Bintan Alumina Indonesia (referred to as 'BAI' below), intends to be the main operating entity of this spin-off.

With the rise in alumina prices, Shandong Nanshan Aluminum Industry International also made a lot of money. In terms of data, revenue increased from $0.173 billion in 2021 to $0.677 billion in 2023, with a compound annual growth rate of 98%; during the same period, the company's profit increased from $39.71 million to $0.173 billion. In the first half of 2024, Shandong Nanshan Aluminum Industry International's revenue was $0.423 billion, compared to $0.299 billion in the same period last year, a 41% year-on-year increase; profit for the period was $0.159 billion, compared to $66.49 million in the same period last year, an increase of 140%.

At the same time, Shandong Nanshan Aluminum Industry International's gross margin has also continued to rise. In 2023, Shandong Nanshan Aluminum Industry International's gross margin increased from 24% in 2022 to 29.2%, and in the first half of this year, its gross margin further surged to 42.2%.

As an alumina producer, Shandong Nanshan Aluminum Industry International is a high-energy-consuming company with heavy asset operation, as can be seen from the financial situation. The prospectus shows that alumina production facilities require a large amount of funds for construction and maintenance. In 2021-2023 and the first half of 2024, Shandong Nanshan Aluminum Industry International's capital expenditures were $0.212 billion, $0.23 billion, $11 million, and $39.6 million respectively, mainly for increasing capacity.

Once the smelting production line is completed, Shandong Nanshan Aluminum Industry International will process alumina into electrolytic aluminum, and then resell the products to downstream aluminum or aluminum product manufacturers or other traders. As an intermediary, Shandong Nanshan Aluminum Industry International bound itself early to a capital-sharing feast with upstream and downstream manufacturers.

In the upstream, Shandong Nanshan Aluminum Industry International mainly purchases raw materials from the Santony family. The Santony family owns several bauxite mines in Indonesia, and the two sides not only have business dealings but also have a deep binding relationship through equity. Mr. Santony holds 2.3% of BAI's equity through MKU (a company controlled by Mr. Santony).

In the downstream, Press Metal is the largest customer of Shandong Nanshan Aluminum Group. From 2021 to 2023 and the first half of 2024, Shandong Nanshan Aluminum Industry International's sales revenue to Press Metal accounted for 73.3%, 53.3%, 47%, and 49.8% respectively. Press Metal is significant, being the largest integrated aluminum company in Southeast Asia. Its alumina annual demand exceeds 2 million tons, and Press Metal has signed a 10-year alumina procurement arrangement with Shandong Nanshan Aluminum Group, agreeing to purchase alumina from Shandong Nanshan Aluminum Group.

This means that Shandong Nanshan Aluminum Industry International has certain performance guarantees in the medium to long term. Press Metal, which has a close relationship with Shandong Nanshan Aluminum Industry International, is also a shareholder of Shandong Nanshan Aluminum Industry International. Before the IPO, Press Metal's shareholding in Shandong Nanshan Aluminum Industry International was 25.59%.

Before the spin-off listing, according to the resolution passed by the directors on September 22, 2024, shandong nanshan aluminium international declared a dividend of 0.26 billion US dollars. The above aluminium industry giants will receive cash, and the most profitable is undoubtedly shandong nanshan aluminium, as a subsidiary of shandong nanshan aluminium listed on the Hong Kong Stock Exchange, which has absolute control over shandong nanshan aluminium international. Before the IPO, shandong nanshan aluminium international was 70.69% owned by NAIHL, a company wholly owned by NAS, which in turn is wholly owned by shandong nanshan aluminium.

After five years of planning, shenzhen new nanshan holding has achieved further success.

It was back in November 2019 that shandong nanshan aluminium, a key player in the Southeast Asia aluminium market, tied up with upstream and downstream aluminium industry giants as shareholders. By October 2023, the news of shandong nanshan aluminium international being spun off and listed had already been released. The spin-off listing will not only expand shandong nanshan aluminium international's financing channels but also to some extent alleviate the financial pressure on shandong nanshan aluminium.

In the first half of this year, as the major shareholder of shandong nanshan aluminium international, shandong nanshan aluminium achieved revenue of 15.667 billion yuan, an 8.05% year-on-year growth; net income attributable to the parent company was 2.189 billion yuan, a 66.68% year-on-year increase. As of the end of June 2024, shandong nanshan aluminium had a cash balance of 25.059 billion yuan, short-term borrowings of 6.49 billion yuan, non-current liabilities due within one year of 0.102 billion yuan, and very strong short-term solvency.

As of June 30, 2024, shandong nanshan aluminium is held by shandong nanshan group with approximately 22.07% equity, while its wholly-owned subsidiary, Yili Power, holds approximately 22.04% equity. Therefore, shandong nanshan group directly and indirectly holds a total of approximately 44.11% of the shares in shandong nanshan aluminium, with shandong nanshan group owned 51% by Nanshan Village Council.

However, the listed companies under the Shandong Nanshan Group have shown different performances.

According to public information, in 1978, Shandong Nanshan's Song Zuowen led a total of 56 village households to develop sideline businesses. They successively established enterprises such as a fiberglass factory and a cotton spinning mill, leading the whole village on the path of 'industrializing the village,' thereby laying the foundation for the development of Shandong Nanshan Group.

According to the official website of Shandong Nanshan Group, Shenzhen New Nanshan Holding has formed a diversified development pattern with aluminium, chemicals, finance, education, technology, tourism, health, and real estate as its main industries. In 2015, there was a change in the legal representative of Nanshan Group, and 45-year-old Song Jianbo took over from Song Zuowen as the legal representative. In the 2024 Hurun Global Rich List, Song Jianbo was ranked with a wealth of 37 billion yuan. Under his leadership, Shandong Nanshan Group now owns three A-share companies: Shandong Nanshan Aluminium, Shandong Nanshan Fashion Sci-Tech, and Hengtong Logistics.

From a business perspective, Shandong Nanshan Aluminium is the core business of Nanshan Group, with a complete aluminum industry chain; Shandong Nanshan Fashion Sci-Tech is engaged in intelligent manufacturing and brand operation of textile clothing, serving as the main business entity of the textile sector within the group and also Nanshan Group's earliest business venture; while Hengtong Logistics mainly engages in logistics transportation business.

In terms of financial data, in 2023, Shandong Nanshan Fashion Sci-Tech's revenue was 1.6 billion yuan, a year-on-year decrease of 2.05%; net profit attributable to shareholders was 0.203 billion yuan, a year-on-year increase of 8.53%. In the first half of this year, both revenue and net profit of Shandong Nanshan Fashion Sci-Tech saw slight year-on-year increases. In addition, after a nearly 30% decrease in revenue in 2023, Hengtong Logistics generated revenue of 1.209 billion yuan in the first half of this year, marking another decline of 36.51%. The company's annual net profit only fluctuated around 0.1 billion yuan.

As the 'Nanshan Series' capital footprint continues to expand, the performance of Nanshan Group is not stable.

From 2021 to 2023, Nanshan Group's revenue was 55.091 billion yuan, 60.713 billion yuan, and 422.13 billion respectively, with net profits attributable to shareholders of 2.729 billion yuan, 2.572 billion yuan, and 24.08 billion yuan. In the first half of 2024, Nanshan Group's operating income was 19.611 billion yuan, a year-on-year decrease of 22.61%; net profit attributable to shareholders was 1.066 billion yuan, a year-on-year increase of 23.95%.

Furthermore, Nanshan Group also faces high debt pressure. As of June 30, 2024, Nanshan Group's cash and cash equivalents were 31.766 billion yuan, short-term borrowings were 25.673 billion yuan, non-current liabilities due within one year were 3.652 billion yuan. Its short-term solvency still needs to be improved, and Nanshan Group's long-term liabilities are as high as 55.097 billion yuan.