The company is a leading enterprise of high purity manganese sulfate in China. In 2002, the company entered the manganese industry, after nearly 20 years of development, the main products are electrolytic manganese dioxide, high-purity manganese sulfate and some manganese ore business. the main business entities are Dalong manganese industry and two ore production companies-Songtao Hongxing Electrochemical Mining and Wanshan Pengcheng Mining. Current production capacity: electrolytic manganese dioxide (EMD) 30,000 tons / year, high purity manganese sulfate 30,000 tons / year (climbing) and manganese ore 250,000 tons / year. In the first three quarters of 2021, the company achieved an output of 19714 tons of electrolytic manganese dioxide and 15223 tons of high-purity manganese sulfate, with an expected annual output of 27313 tons and 20442 tons respectively.
High purity manganese sulfate is expected to increase 7 times in four years in the future. High purity manganese sulfate is currently used in ternary materials, benefiting from the rapid development of new energy vehicles, it is expected to make rapid breakthroughs in lithium manganate and lithium ferromanganese phosphate in the future. in the future, there will be good applications in sodium battery cathode materials, lithium-rich manganese-based materials and cobalt-free nickel-manganese binary materials. It can be said that the manganese source of lithium-ion battery mainly comes from high-purity manganese sulfate, even if it is not, it should be converted from high-purity manganese sulfate. According to comprehensive estimates, the demand for high-purity manganese sulfate will reach 1.34 million tons in 2025, achieving a rapid growth of seven times in four years, with a compound growth rate of 70%, entering an unprecedented highlight moment in the industry.
The company is the leader of inorganic salt industry. The business mainly covers barium salt and strontium salt, including 290000 tons of barium carbonate and 55000 tons of barium sulfate, ranking first in the country and even first in the world, with a market share of about 40%. In 2020, the company produced 231428 tons of barium carbonate, 4116 tons of high-purity barium carbonate, 3369 tons of high-purity barium chloride and 50823 tons of barium sulfate; strontium carbonate production capacity of 30,000 tons, market share of 30% of the annual output of 23765 tons.
The company mainly sells two series of products: inorganic salts and manganese products. From a separate point of view, the output of inorganic salts has increased steadily, mainly benefiting from the increase in demand, prices and gross profit margin, thus boosting performance; the increment of manganese products mainly comes from the simultaneous increase in volume and price of high-purity manganese sulfate. We can see that the company's profits have grown rapidly in the third quarter, and its single-quarter performance has reached a record high. considering that the company has previously spun off Rongguang Mining and sold its stake in Qingdao Hongxing Logistics, reducing the drag of non-main business, the company is expected to enter the fast lane of performance growth in the future.
For the first time, it is given a "buy" rating and a target price of 33.9 yuan. To sum up, we expect the company's operating income from 2021 to 2023 to be 1.78 billion yuan, net profit 2.19 yuan, 3.34 billion yuan, and year-on-year growth rate is 297%, 52%, 25%, respectively, and the corresponding EPS is 0.74, 1.13, 1.41 yuan, respectively, and the PE of the previous share price (2021.12.11 closing price) is as much as 27-18-14. Taken together, the company is a scarce leader in the subdivision of high-growth new energy battery materials, giving a price-to-earnings ratio of 30 times earnings in 2022, with a corresponding share price of 33.9 yuan, which is 67% more than the current stock price (2021.12.11 closing price 20.24 yuan).
Risk tips: (1) the company's capacity release is lower than expected; (2) the epidemic exceeds expectations and affects demand; (3) the risk of core technology leakage; and (4) the risk of industrial policy change.