Shares of CHINA XLX FERT (01866) climbed nearly 8% during the morning session, last trading up 7.55% at HK$10.11 with turnover reaching HK$17.7553 million. The sharp rally follows the company's recent profit alert announcement.

The fertilizer giant projected net profit of approximately RMB 1.15 billion to RMB 1.23 billion for the first half of 2026, marking a year-on-year increase of 52% to 62%. Profit attributable to owners of the company is expected to range from roughly RMB 850 million to RMB 920 million, up 42% to 54% year-on-year.

The group attributes the substantial anticipated growth to the full release of scale efficiencies and continuous optimization of its product mix. With both sales volume and prices of core products rising, overall gross profit margins have been lifted significantly during the reporting period.

CICC has issued a research note expressing confidence in the company's trajectory, stating that with new capacity expansion and ongoing technological upgrades, the scale effects at CHINA XLX FERT are likely to become even more pronounced, potentially consolidating and enhancing its cost advantages.

Addressing market concerns about oversupply in the domestic urea market, CICC contends that current urea profitability is at a cyclical low with limited room for further price declines. Given the company's industry-leading cost position, CICC believes capacity expansion could serve as a key driver of earnings growth.

The brokerage also highlighted potential catalysts for the stock, including new production capacity coming online to boost performance and improved liquidity following the company's inclusion in the Stock Connect program.