Core viewpoints
The price of sulfur rose sharply along with the price of oil and gas and led to a rise in the price of sulfuric acid. Sulfur mainly comes from the sulfur recovery units of natural gas processing plants and refineries, and its price is related to the price of natural gas and crude oil. 90% of the downstream of sulfur is sulfuric acid, while the downstream of sulfuric acid is mainly sulfuric acid titanium dioxide, phosphorus chemical industry (phosphate fertilizer, calcium hydrogen phosphate), fluorine chemical industry (hydrofluoric acid), caprolactam and so on. Benefiting from the rise in oil and gas prices and the high demeanor of phosphate fertilizer downstream, the price of sulfur has risen from 500yuan / ton at the end of 2019 to 3000 yuan / ton at present, while the price of sulfuric acid has increased from 150yuan / ton to 625yuan / ton in the same period.
The pyrite route is an alternative route for sulphuric acid production from sulfur, and the price of pyrite continues to rise. Sulphuric acid production process is divided into sulphuric acid production from sulfur, smelting by-product sulphuric acid and pyrite to sulphuric acid. Sulphuric acid production from sulfur is the main sulphuric acid production process, accounting for about 46% in China, while the rest are 35% for smelting acid and 17% for ore acid. With the sharp rise in the price of sulfur, the acid-to-price ratio of smelting acid and ore is highlighted. As the production capacity of smelting by-product acid is difficult to expand, we believe that the new sulfuric acid will be more inclined to pyrite to produce sulphuric acid, driving the price center of pyrite up. The price of Yunfu pyrite was about 480 yuan / ton in 2020 and rose to 1200 yuan / ton in October 2021. 21Q4 has recovered slightly and has now risen to 950 yuan / ton.
The company is the leader of domestic sulfur concentrate and is expected to benefit from the rising prices of pyrite and sulfuric acid. Yunfuyun Sulphur Mining, a wholly owned subsidiary of the company, has a production capacity of 3 million tons of raw ore, 1.2 million tons of sulfur concentrate (refined pyrite, grade 48%), 500000 tons of-3mm ore (grade 35%), 520000 tons of sulfuric acid, 200000 tons of phosphate fertilizer and 240000 tons of iron powder. According to the data of the annual report in 2020, the company produces 1.08 million tons of sulfur concentrate with an average sales price of 331 yuan / ton (excluding tax, the same below) and a cost of 257 yuan / ton;-3mm ore output of 210000 tons, average sales price of 228 yuan / ton, cost of 100 yuan / ton. Due to the high grade of pyrite concentrate, the market price is much higher than that of ordinary pyrite. In terms of production capacity, the increase in pyrite price by 100 yuan / ton will bring 170 million yuan gross profit to the company.
We forecast that the company's annual net return profit in 2021-22-23 is 260,000,000 EPS0.39/0.78/0.80 yuan, which is 8.16 times the current price of PE 16.92Compact 8.40Unix. As a domestic sulfur concentrate-sulphuric acid leader, the company is expected to benefit from the current high price of sulfur. Coverage for the first time, giving a "overweight" rating.
Risk hint: the price of sulfur, sulfuric acid and sulfur concentrate fluctuates greatly; the downstream demand of sulfuric acid is lower than expected.
