Event

The company's performance increased significantly in the first half of 2022.

In the first half of 2022, the company achieved revenue of 1.413 billion yuan, an increase of 64.61 percent over the same period last year, a net profit of 241 million yuan, a year-on-year increase of 239.65 percent, and a net profit of 239 million yuan, an increase of 283.80 percent over the same period last year. Among them, Q2 realized a net profit of 116 million yuan in a single quarter, a decrease of 7.20% compared with the previous quarter, and a net profit of 119 million yuan after deducting non-return, a decrease of 0.83% compared with the previous quarter.

The company intends to buy back shares for employee stock ownership plan or equity incentive

The company announces that it intends to use its own funds to buy back shares with a total amount of not less than 80 million yuan and not more than 150 million yuan, and the repurchase price shall not exceed 30 yuan per share. According to the maximum repurchase price of 30 yuan per share, the estimated number of repurchased shares is about 2.6667 million to 5 million shares, accounting for 1.23% to 2.3% of the company's current total share capital of 217.2 million shares. The repurchased shares will be used for the follow-up implementation of employee stock ownership plans or equity incentives.

Brief comment

Domestic water treatment agent leader, capacity expansion and supply chain to further enhance market position and competitiveness the company is a domestic water treatment agent leading enterprise, with a production capacity of 387000 tons in mid-2022. At the same time, after the adjustment of the fund-raising project, there are still 50, 000 tons of water treatment agent project to be put into production. In the series of water treatment agent products, there are still 221000 tons of water treatment agent (some for self-use) and industrial chain extension projects dichloropropanol and phosphorous acid waiting to be put into production or under technical transformation. Sales of water treatment agents reached 122600 tons in the first half of 2022. The supply pattern of water treatment agent industry is relatively good, and the larger leading enterprises in China are mainly companies and clear water sources. Due to the most complete product line and programs, the company has a strong ability to serve customers at a comprehensive premium. Benefiting from higher product prices in the first half of 2022, the company's gross profit margin of water treatment agents was repaired to 25% from 22% in 21 years (17% in the first half of 21 years). In the future, the company is also expected to further upstream supporting phosphorus trichloride and other major raw materials to further enhance competitiveness.

Layout of chlor-alkali assets to ensure capacity expansion and industrial chain extension of liquid chlorine, caustic soda high prosperity contribution incremental performance company leases Zaozhuang Zhongke chemical chlor-alkali assets, the project includes 300000 tons of caustic soda production capacity, by-product 250000 tons of liquid chlorine and 7500 tons of hydrogen, including two sets of chlor-alkali plants, corresponding to caustic soda production capacity of 150,000 tons / year, one has been put into operation on May 7, 2022, and the other is undergoing technical transformation because of its long running time. On the one hand, it can meet the liquid chlorine resources needed by the company's main business and future expansion to VC and CEC, while caustic soda is in a high business cycle, which can also contribute to incremental performance. At present, the chlor-alkali production capacity of the second phase of chlor-alkali is 150000 tons, and the sales volume of chlor-alkali at the end of the half-year report period has reached 87700 tons (including 32% liquid alkali, liquid chlorine and mirabilite and other by-products, caustic soda has not been reduced to 100%). The old line 150000 tons will also be put into use after the technical transformation is completed, further contributing to the increase. In 2022, the average price of 32% ionic membrane liquid alkali in Shandong was 3353 yuan / ton, which was in the business cycle. The company's chlor-alkali gross profit margin in the first half of the year is about 40%.

Relying on the goal of building "Lithium Power Capital of Northern China" in Zaozhuang, the company lays out the VC industrial chain and expands the growth space. Zaozhuang City, where the company is located, is committed to developing the lithium industry to achieve industrial transformation and upgrading. According to the Science and Technology Daily, there are 57 lithium enterprises and more than 200 product types in Zaozhuang, forming a relatively complete industrial chain layout. In the first half of this year, the revenue of the lithium power industry in Zaozhuang increased by 147% compared with the same period last year, and the industrial added value increased by 48.8%. Zaozhuang strives for the output value of lithium electricity to reach 80 billion yuan in 2025, 150 billion yuan in 2030 and 300 billion yuan in 2035.

Considering the regional advantages, the company actively lays out the lithium industry chain, and the existing planning projects and progress are as follows:

10,000 tons of lithium iron phosphate is under construction and is expected to be put into production in October 2022; the 20,000-ton VC project is planned, the first phase of 10,000 tons is expected to be completed in October 2022, and the capacity will be released one after another; at the same time, the 50,000-ton CEC project is expected to be completed one after another.

Earnings forecasts and valuations:

It is estimated that the estimated net profit from 2022 to 2024 is 4.81,6.65 and 839 million yuan, corresponding to EPS 2.23,3.08,3.89 yuan, covering for the first time and giving a "buy" rating.

Risk Tips:

The production progress of the main water treatment agent expansion and lithium power VC project was lower than expected; the procurement costs of main raw materials such as phosphorus trichloride, phosphorous acid, tertiary amine, glacial acetic acid and maleic anhydride increased significantly; and the lower-than-expected demand of VC industry caused overcapacity.