Incident: The company released its 2022 semi-annual performance forecast. It is expected to achieve net profit of 1,650 million yuan to 1,750 million yuan in the first half of 2022, an increase of 127.43% to 141.21% over the previous year; deducting non-net profit of 1,304 million yuan to 1,404 million yuan, an increase of 108.48% to 124.47% over the previous year. Among them, Q2 is expected to achieve net profit of 1,012 million yuan to 1,112 million yuan, a year-on-year increase of 97.27% to 116.76%; net profit deducted from net profit of 707 to 807 million yuan, an increase of 51.06% to 72.44% over the previous year.
The fertiliser+chlor-alkali sector is booming, which has significantly boosted the company's performance. In the fertilizer sector, the average market price of the company's main product, ammonium phosphate, in the second quarter was 4,038 yuan/ton, +31.24% year on year; the average urea market price was 3105 yuan/ton, +31.07% year on year. In the chlor-alkali sector, the average price of the company's main product PVC in the second quarter was 8,585 yuan/ton, -4.34% year on year; the average price of caustic soda market was 4,414 yuan/ton, +124.53% year on year. The company's main products are booming at a high level. Coupled with the improvement of supporting facilities in the tourism industry chain, major raw materials such as calcium carbide have achieved most self-sufficiency, so the company's performance has increased markedly.
The added value of the Jiangjiadun phosphate mine may affect non-recurring profit and loss in Q2. I am optimistic about the company's potential to expand to new energy sources plus the bottom reversal of governance. In the first half of 2022, the company's non-recurring profit and loss items are expected to be $346 million, of which Q2 is $305 million. In connection with the capital increase announcement for Bangpu Yihua disclosed by the company on April 21, it was mentioned that the net asset book value of Jiangjiadun Mining on the evaluation benchmark date (September 30, 2021) was about 37 million yuan, the assessed value was 397 million yuan, and the value-added amount was about 361 million yuan. With the completion of the capital increase for Bangpu Yihua New Materials Company, we estimate that the non-recurring profit and loss of about 300 million yuan in the second quarter was mainly due to the increased value of Jiangjiadun phosphate ore. In the short to medium term, the results of improving the company's internal governance will gradually be revealed, and the company will reshape Yichang's status as the “eldest son of industry”; in the long term, the company is based on Yichang City, which has excellent resources+regional+political and business environment, and relies on the continuous expansion of phosphorus chemicals into new energy sources. We are optimistic about the company's potential to enter the new energy industry.
The boom in the main chemical industry is expected to continue, and a two-wing development model of resources+new energy can be expected in the future. Looking at the short term, new production capacity is limited and backward production capacity continues to be cleared due to supply-side structural adjustments. We believe that the tight balance between supply and demand in the phosphate fertiliser and chlor-alkali industry will continue, coinciding with the opening of export arbitrage opportunities under high domestic and foreign price differences. We expect ammonium phosphate+caustic soda to continue to be at a high level in the second half of 2022. The company has sufficient production capacity and is expected to continue to fully benefit from this boom cycle. Looking at the medium to long term, in the west, the company has built a chlor-alkali chemical industry chain with strong resource and cost advantages; in Yichang, Hubei, it is expected that the company will continue to build a phosphorus-fluorine fine chemical industry chain, deepen downstream cooperation, and continue to transform into the new energy and new materials industries. We are optimistic that the two-wing development model of “left hand resources, right hand new energy” will establish the company's medium- to long-term competitive advantage and growth.
Investment advice: The company's 2022 semi-annual performance forecast is in line with expectations. We maintain the previous forecast: the company is expected to achieve revenue of 224.31/225.67/25.67/25.068 billion yuan in 2022/2023/2024, achieve net profit of 31.49/33.23/3.805 billion yuan, corresponding to EPS of 3.51/3.70/4.24 yuan respectively. Corresponding to the current PE is 6.0x/5.7x/5.0x, maintaining the target price of 31.59 yuan, maintaining the “strong” rating.
Risk warning: Project progress falls short of expectations; large fluctuations in international oil prices; changes in safety and environmental policies, etc.