Event description

On the evening of July 29, Sichuan Heng shares released its 2022 half-year report that the company realized operating income of 1.587 billion yuan in the first half of 2022, an increase of 57.77% over the same period last year, realized net profit of 370 million yuan, an increase of 254.08% over the same period last year, and realized deduction of non-net profit of 371 million yuan, an increase of 311.65% over the same period last year.

Phosphorus chemical industry maintained its high demeanor in the second quarter, with a year-on-year increase in the first half of the year. 2022H1 achieved a net profit of 370 million yuan, an increase of 254.08% over the same period last year, and a deduction of 371 million yuan in non-net profit, an increase of 311.65% over the same period last year. In the single quarter, Q2 achieved a net profit of 267 million yuan, an increase of 156.73% over the previous quarter, and a deduction of 269 million yuan for non-net profit, an increase of 163.73% over the previous quarter.

The company's first-half performance reached a record high, mainly due to the phosphorus chemical industry to maintain a high demeanor, the company's main phosphorus chemical products and phosphate rock sales unit price continued to rise, and increased the sales of phosphoric acid, business income increased. The average price of feed-grade calcium dihydrogen phosphate of 2022H1 Company is 4801.05 yuan / ton, up 79.28% over the same period last year; the average price of monoammonium phosphate is 2964.77 yuan / ton, up 18.60% over the same period last year; the average price of phosphate rock is 813.35, up 197.53% over the same period last year; and the average price of phosphate is 10814.27 yuan / ton, up 97.85% over the same period last year. As the overall supply and demand pattern of phosphorus chemical industry is still tight in the second half of the year, the prices of major phosphorus chemical products will fluctuate at high levels, and the company's annual operating income and performance are expected to achieve substantial growth.

The acquisition of phosphate rock is progressing smoothly, and on April 16, 2022, the company issued a non-public A-share plan to finance a new 2.5 million tons / year mining project for Jigongling Phosphate Mine, with a construction period of 4 years. On June 13, 2022, the mining depth of Xiaoba phosphorus Mine held by Fulin Mining increased by 300 meters, the phosphate ore reserves increased, and the production scale increased from 500,000 tons / year to 800,000 tons / year. At present, the company has 2.8 million tons / year production capacity of Xiaoba and Xinqiao phosphate mine, and the long-term production capacity will be 1030 million tons / year. The expansion of phosphate rock capacity helps to improve the control and guarantee capacity of phosphate rock resources upstream of the production base, and brings greater cost advantages for the production of downstream phosphorus chemical products of the company.

The fund-raising project is progressing smoothly, and the 1.5 million tons / year mineral processing project and 300,000 tons / year pyrite sulfuric acid project planned in Fuquan City in the 2021 convertible bond project of phosphorus Chemical Industry are progressing smoothly. The completion of this project will promote the comprehensive utilization of the company's low and medium grade phosphate ore, ensure the stability of raw material sulphuric acid supply, and fill the gap of 900,000 tons / year phosphate concentrate needed by the company. At the same time, 200,000 tons / year half-water-dihydrate wet-process phosphoric acid and intensive processing in Guangxi are also expected to enter the trial production stage in August 2022, and the landing of this project will further improve the company's industrial chain and enrich the company's product structure. improve the company's anti-risk ability, and further consolidate the company's leading position in phosphorus chemical industry.

Joint venture to build hexafluorine project, sustainable distribution of new energy materials

On June 25, 2022, Hengda Mining, a controlling subsidiary of the company, plans to establish a joint venture subsidiary Huaguan New Energy with Guoxuan Group, which includes lithium hexafluorophosphate and its raw materials lithium difluorosulfonimide, phosphorus trichloride and phosphorus pentachloride. At the same time, Hengda Mining plans to invest 1.099 billion yuan with Tianyi Mining to increase the capital of Hengchang New Energy Materials Co., Ltd., engaged in phosphate mining, processing and purchase and marketing, has completed the change of the right to the use of construction land. The company continues to distribute new energy materials such as iron phosphate, lithium hexafluorophosphate and lithium iron phosphate, and has signed cooperation agreements with the people's governments of Fu'an and Weng'an with a total investment of 17 billion yuan. the production lines of 1.6 million tons / year battery iron phosphate and 200,000 tons / year battery grade iron phosphate, 20,000 tons / year lithium hexafluorophosphate and 100000 tons lithium iron phosphate will be built in the long term. Among them, Fuquan Phase I food-grade phosphoric acid purification project has been raised through a non-public offering of A shares in April 2022, and the construction period is expected to be 15 months. In addition, the company's iron phosphate project for 100kt/a batteries will be completed this year. Based on the advantages of its own phosphorus source, the company actively grasps the development opportunities of the new energy materials industry, and is expected to build the new energy materials into the company's second growth curve in the future, bringing new profit increments for the company.

Investment suggestion

It is estimated that the company's net profit from 2022 to 2024 will be 8.64,13.35 and 1.9 billion yuan respectively, with year-on-year growth rates of 135.0%, 54.4% and 42.4%, respectively. The corresponding PE was 17, 11 and 8 times, respectively.

Maintain a "buy" rating.

Risk hint

(1) the risk that the project production schedule is not as expected.

(2) the risk that the project approval progress is not as expected.

(3) the risk of a sharp fall in product prices.

(4) the risk of large fluctuations in raw material prices.

(5) the risk that the downstream demand is lower than expected.