Endogenous+epitaxial growth, stable leading position

The company is mainly engaged in the production and sale of graphite and carbon products. Driven by both endogenous and epitaxial growth, the company formed a national layout and became the leading graphite electrode enterprise in China. The capacity utilization rate and profitability have been superior to the industry average for a long time, and the industrial advantages are outstanding.

The supply and demand for graphite electrodes is improving

In a dual-carbon context, supply and demand in the graphite electrode industry are expected to experience an overall improvement. Additional production capacity on the supply side may be effectively controlled. On the demand side, with the accelerated increase in the supply of scrap resources, electric furnace steel is expected to usher in significant development with policy support, which in turn will drive demand for graphite electrodes. In the short term, the production cycle of graphite electrodes is long, and it is difficult to increase significantly under environmental protection production limits. Prices may rise steadily under cost support.

Increase production capacity, upgrade products, transform carbon-strong enterprises

The company is committed to building a world carbon powerhouse. In terms of graphite electrodes, the company already has a production capacity of 295,000 tons, which is expected to rise further to 38,000 tons in the future. In terms of specialty graphite, the company is deeply involved in isostatic pressure graphite R&D and manufacturing, breaking foreign monopolies, becoming an important supplier for domestic photovoltaic companies, and deploying special graphite for nuclear power, which has high potential for growth.

Integrated layout with outstanding cost advantages

Raw materials are the most important component in the cost of graphite electrodes. Thanks to the company's vertical integration of raw materials, the cost advantage is outstanding, and the supply of raw materials is stable. Furthermore, the company adheres to fine management and operates with a low balance ratio, and the company's profitability is clearly superior to the industry average.

Risk warning

Project construction progress fell short of expectations; policies such as power limits and production limits affected the company's operating rate; fluctuations in graphite electrode prices and raw material prices exceeded expectations.

The first coverage gave a “buy” rating

Currently, the supply and demand environment for graphite electrodes is improving, and prices have upward momentum. As an industry leader, the company has outstanding industrial advantages, and increased production capacity combined with product upgrades have brought growth attributes to the company.

We expect the company's net profit from 2021 to 2023 to be 11.8/165/2.010 billion yuan respectively, and the profit growth rate will be 115.8%/39.5%/22.1%, covering the “buy” rating for the first time.