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东岳硅材(300821):母公司注资工业硅公司 保障公司原材料供应

Dongyue Silicon (300821): The parent company invests in industrial silicon companies to guarantee the company's supply of raw materials

招商證券 ·  Oct 6, 2021 16:00

  Incident: Recently, Dongyue Group issued an announcement that Dongyue Fluorosilicon Technology Group Co., Ltd., a wholly-owned subsidiary of the group, signed a capital injection agreement to inject 152 million yuan into Hainan Guji Investment Partnership. After the capital injection, Dongyue Group will hold 89.73% of Hainan Guji's shares.

Further improve the industrial chain to ensure the supply of raw materials. Hainan Guji currently has a total design capacity of 130,000 tons/year, and another 100,000 tons of industrial silicon production capacity are under construction. After completion, the target company's total production capacity is expected to reach 230,000 tons/year, ranking third in China. In the future, Industrial Silicon Company will prioritize the supply of industrial silicon raw materials to Dongyue Silicon. We believe this will help the company further improve its industrial chain, ensure a stable supply of raw materials, reduce production costs, and enhance its competitive advantage. Furthermore, the electricity used by the target industrial silicon company is provided by renewable energy. The Shandong region where the company is located is a province that meets the energy consumption standards. Under the current tense situation of the “double carbon” production limit and electricity limit policy, production capacity is less affected. This will highlight the company's stable supply capacity in the market and is expected to further expand its market share.

It is expected that brother companies will be merged, and the advantages of the industrial chain will further strengthen the leading position. Considering Dongyue Group's position on the Dongyue silicon industry chain and considering reducing related transactions starting from industrial collaboration, we believe that in the future, it is not ruled out that Dongyue Group will divest Hainan solid base from Dongyue Fluorosilicon Technology Group and inject it into Dongyue Silicon Technology Group. This will reduce the company's communication costs, improve production efficiency, and fully utilize the advantages of industrial chain integration to enhance the company's profitability. Furthermore, the company plans to invest about 100,000 tons of industrial silicon production capacity in Luodian County, Guizhou Province. If Hainan Guji is merged into the company in the future, after all planned construction capacity is completed, the company will have 330,000 tons/year of industrial silicon production capacity, ranking second in the country. In the fourth quarter of this year, the company's fund-raising project will soon be put into operation. At that time, the company will have 600,000 tons/year of silicone monomer production capacity, and the scale is expected to enter the top five in the world. After the new project is put into operation, deep-processing products will be more abundant, production capacity advantages will be exploited to a greater extent, and the properties of new materials will continue to be strengthened. Valuation is expected to be achieved, and performance will double.

Compared to industry leaders, the company is clearly undervalued. Hesheng Silicon, a leader in the industry, currently has an industrial silicon production capacity of 730,000 tons and a production capacity of 930,000 tons of silicone monomers. By the end of next year, Hesheng Silicon will have an industrial silicon production capacity of 1.13 million tons and organic silicon monomer production capacity of 1.33 million tons. If industrial silicon production capacity were injected into Dongyue Silicon, after comparing the production capacity of the company and Hesheng Silicon Industry (as of the end of 2022), it was found that the company's industrial silicon production capacity was 0.20 times that of Hesheng Silicon, and the production capacity of silicone monomers was 0.45 times that of Hesheng Silicon, while the market value was only 0.15 times that of Hesheng Silicon, which is clearly underestimated. We believe that as the company improves its industrial chain layout, leverages the advantages of industrial chain integration, and enhances profitability, product gross margin is expected to increase further in the future. Furthermore, by increasing investment in scientific research and strengthening R&D capabilities, the company continues to expand in the direction of middle and downstream products. The deep-processing products business already accounts for more than 89% of revenue. The company's new material properties are obvious, and they should enjoy higher valuations.

Maintain a “Highly Recommended - A” investment rating. Based on current industry trends and product price estimates, we expect results of around 400 million in the third quarter. The company's revenue for 2021-2023 is estimated to be 4,542 billion yuan, 7.711 billion yuan and 9.685 billion yuan respectively. The net profit of the mother is 1,235 million yuan, 2,235 million yuan and 2,802 billion yuan respectively, and EPS is 103 yuan, 1.86 yuan and 2.33 yuan respectively. The current stock price corresponds to PE 23.3 times, 12.9 times, and 10.3 times, respectively, and continues to give a “Highly Recommended - A” investment rating.

Risk warning: the commissioning of new production capacity falls short of expectations, the risk of falling product prices, and there is uncertainty about injecting industrial silicon production capacity into the company

The translation is provided by third-party software.


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