Event: on July 29, 2022, Chuanheng shares released the 2022 interim report: realized operating income of 1.587 billion yuan, an increase of 57.77% over the same period last year; realized net profit of 371 million yuan belonging to shareholders of listed companies, an increase of 254.08% over the same period last year; the weighted average rate of return on net assets was 9.72%, an increase of 6.23 percentage points over the same period last year. The gross profit margin of sales was 41.53%, an increase of 14.73% over the same period last year; and the net profit margin of sales was 24.10%, an increase of 13.28% over the same period last year.

Of this total, Q2 realized revenue of 978 million yuan in 2022, an increase of 58.18% over the same period last year and 60.59% from the previous year; the net profit from home was 267 million yuan, an increase of 277.75% from the same period last year and 156.73% from the previous year; the weighted average rate of return on net assets was 6.99%, an increase of 4.65% over the same period last year and 4.11% from the previous year. The gross profit margin of sales was 18.09%, an increase of 18.09% over the same period last year, an increase of 10.14% over the same period last year; and the net profit margin of sales was 28.22%, an increase of 16.39% over the same period last year, and an increase of 10.74% over the same period last year.

Comments:

The demeanor of the phosphating scene remained high, and the company's performance increased significantly.

In the first half of 2022, the price of phosphorus chemical products increased significantly due to the high demeanor of agriculture and the sustainable development of the new energy industry. According to Zhuochuang, the average price of 2022H1 and calcium dihydrogen phosphate was 4874.18 yuan / ton, up 76.02% from the same period last year and 22.77% from the previous month; the average price of monoammonium phosphate was 3645.7 yuan / ton, up 46.18% from the same period last year and 10.25% from the previous month; and the average price of phosphate rock was 731.64 yuan / ton, up 105.08% from the same period last year and 33.68% from the previous month. In the first half of 2022, the company achieved operating income of 1.587 billion yuan, an increase of 57.77% over the same period last year, and a net profit of 371 million yuan, an increase of 254.08% over the same period last year.

Among them, in the second quarter of 2022, China is in the peak season of fertilizer use, the price of phosphorus chemical products has further risen, and the performance of the company has increased significantly compared with the previous quarter. According to Zhuochuang Information, the average price of Q2 and calcium dihydrogen phosphate in 2022 was 5760.89 yuan / ton, up 89.63% from the same period last year and 45.55% from the previous month; the average price of monoammonium phosphate was 4138.31 yuan / ton, up 55.78% from the same period last year and 31.93% from the previous month; the average price of phosphate rock was 850.89 yuan / ton, up 124.20% from the same period last year and 39.85% from the previous month.

Since July 2022, the prices of main raw materials sulfur and synthetic ammonia have dropped sharply, and the prices of the company's main products calcium dihydrogen phosphate and monoammonium phosphate have also declined. According to Zhuochuang, as of July 29, 2022, the price of calcium dihydrogen phosphate was 4250 yuan / ton, down 28.57% from the beginning of the month; the price of monoammonium phosphate was 3500 yuan / ton, down 23.08% from the beginning of the month. However, the contradiction between supply and demand of phosphate ore still exists, and the price remains high, reaching 1090 yuan / ton as of July 29, 2022, up 9% from the beginning of the month. The company has its own phosphate rock, at present, the price of raw materials such as sulfur is falling rapidly, and the company's profitability is expected to improve.

The project under construction continues to advance, bringing a new growth point for the performance in the second half of 2022. In the convertible bond raising project of 2021, "1.5 million t / a mineral processing equipment and supporting facilities for comprehensive utilization of low and medium grade phosphate rock" and "300000 t / a pyrite sulphuric acid project" have reached the scheduled state of use. 1.5 million after the comprehensive utilization of low and medium grade phosphate ore is fully reached, the concentrator is expected to produce about 930000 tons of phosphate concentrate per year, which can make up for the gap in the supply of phosphate concentrate, ensure the supply of phosphate concentrate needed for production, and improve the comprehensive efficiency of the company. The completion of the 300000 t / a pyrite sulfuric acid project is conducive to ensuring the stability of raw material sulfuric acid supply and improving the self-sufficient rate of sulfuric acid. At the same time, the construction progress of the company's 200000 tons / year water-dihydrate wet process phosphoric acid and deep processing project has reached 80%, and is expected to be put into production in the second half of 2022. The addition of 150000 tons / year of calcium dihydrogen phosphate and 100000 tons / year of wet purified phosphoric acid will bring new production points for the company's performance in the second half of the year. The construction progress of Hengxuan new energy 100000 tons / year iron phosphate project has reached 65%, and is expected to be put into production in the second half of 2022. The 120000-ton battery-grade monoammonium phosphate project is progressing smoothly and is expected to be put into production by the end of the third quarter. According to data from the China Automotive Power Battery Industry Innovation Alliance, from January to June 2022, China's cumulative 64.4GWh of lithium iron phosphate batteries accounted for 58.5 percent of the total, an increase of 189.7 percent over the same period last year. The company's products in the iron phosphate industry chain are becoming more and more perfect and are expected to benefit from the rapid development of the new energy industry.

The reserves of phosphate ore resources have been further expanded, and the advantage of integrated mineralization is outstanding in 2021. Fulin Mining, a subsidiary of the company, has completed the acquisition of mining rights and related assets of Xinqiao Phosphate Mine and Jigongling Phosphate Mine. Fulin Mining has held three mining rights: Xiaoba phosphate mine, Xinqiao phosphate mine mining right and Jigongling phosphate mine mining right. In June 2022, Fulin Mining, a subsidiary of the company, obtained the "notice of the Provincial Department of Natural Resources on approving the registration of alteration of mining rights in Xiaoba phosphorus Mine of Guizhou Fulin Mining Co., Ltd." issued by Guizhou Natural Resources Department, the mining depth of Xiaoba phosphate mine has been changed from 1392 meters to 1000 meters to 1392 meters to 700m, the inflection point of mining area remains unchanged, and the production scale has expanded from 500000 tons / year to 800000 tons / year. In Xiaoba phosphate mine, the total phosphate ore reserves were found to be 30.0784 million tons in the range of quasi-mining elevation and 17.6569 million tons in the range of expanded boundary elevation. The change of mining rights expands the company's phosphate ore reserves, increases the production scale of phosphate rock, further improves the self-sufficiency rate of the company's phosphate ore, and strengthens the advantage of industrial chain integration. The company's existing phosphate rock production capacity of nearly 3 million tons / year, in the construction capacity of Jigongling phosphate rock 2.5 million tons / year and shares in Tianyi Mining Company 5 million tons / year.

It is estimated that the company's net profit in 2024 will be 8.41,12.40 and 1.848 billion yuan respectively, and EPS will be 1.72,2.54,3.78 yuan per share, corresponding to 17,12,8 times PE, maintaining a "buy" rating.

Risk tips: macroeconomic fluctuation risk; capacity investment is not as expected; raw material price fluctuation risk; future demand decline; new project schedule is not as expected; non-public offering process uncertainty risk.