Main points of investment
High quality ferroalloy faucet. Ordos, founded in 1979, is the world's largest producer and distributor of ferrosilicon. 1) ferroalloy business: with 1.6 million tons / year ferrosilicon production capacity and 400,000 tons / year silicon-manganese alloy production capacity, it is the largest ferrosilicon supplier in China; in 2020, the company produced 1.47 million tons of ferrosilicon and 370000 tons of silicon-manganese alloy. 2) PVC business: the company has a PVC production capacity of 800000 tons, which can not be underestimated; 3) Cashmere business: the company has been ploughing the cashmere industry for 40 years and is a well-known global brand.
Ferrosilicon industry: hard gap, continue to be bullish. As of April 2, 2022, the current price recovery of ferrosilicon has risen to a higher level of 10000 yuan / ton. At the same time, it is also accompanied by a sharp decline in inventories. at the end of March 2022, the social inventory of ferrosilicon was only 43000 tons, down 50% from the same period last year. We believe that behind it is the rapid improvement in supply and demand of the industry: 1) the conflict between Russia and Ukraine has led to a gap in global supply and demand of ferrosilicon in the past month, which in turn has led to the growth of China's ferrosilicon exports, which increased by more than 100% from January to February. 2) the output of the steel plant at the demand end gradually resumed production, returning to 2.67 million tons per day in February. Based on the flat control of steel production throughout the year, and the bottleneck of ferrosilicon production back to more than 500000 tons per month, we judge that the gap between supply and demand is still obvious or even further enlarged, and ferrosilicon prices will further strengthen.
Coal can be supplied by itself, and the attribute of resources is revealed. The company produces 4.6 million tons of raw coal in 2020, with reserves of about 200 million tons. The company added 25% equity in Yongmei Mining Company in 2021, and the acquisition company controlled a total of nearly 11 million tons of coal production capacity, which can basically achieve self-supply of coal. Considering that coal prices are likely to remain high, companies can reduce fuel costs by completely self-supplying coal, or hope to improve profitability by exporting self-produced high-calorific value and buying low-calorific value coal.
Strong performance, high dividend, high quality blue chip. The company's performance has achieved six consecutive years of growth, with a compound annual growth rate of 45% of net profit, including an estimated 300% year-on-year growth in 2021. Since listing, the company has carried out cash dividends every year, with a cumulative dividend amount of 3.8 billion; the dividend ratio and dividend yield are relatively high, with a dividend ratio of about 70% in 2020 and a dividend rate of 4.58%. Leading in the sector, the company's high dividend has become a characteristic and sustainable.
Profit forecast and investment rating: considering the upward price of the company's main products, we estimate that the company's revenue in 2021-2023 will be 364 million yuan, with a year-on-year growth rate of 57%, 10%, and 9%, and its net profit will be 100 million yuan in 61-68-60, with a year-on-year growth rate of 300%, 11% and 7.1%, respectively, and the corresponding PE will be 7.0, 6.3 and 7.1x, respectively. According to the business plate, the ferroalloy plate, we select Hegang Resources and Fangda carbon, the chlor-alkali chemical plate selects Zhongtai Chemical and Tianyuan shares, and the clothing plate selects Hailan Home and Taiping Bird, which also belong to the well-known trademark of clothing. The average PE from 2022 to 2023 is 9.1 and 7.2x. The valuation of the company is lower than that of the comparable company, considering the steady development of the company's electrometallurgical sector and clothing sector, so it gives the company a "buy" rating for the first time.
Risk tips: ferrosilicon price fluctuations; cost fluctuations; the company's own operating risks.
