Events:

The company announced that it plans to increase its capital to Wachovia New Materials (Sichuan) Co., Ltd., a wholly-owned subsidiary, by 450 million yuan. After the capital increase, the registered capital of Sichuan Wachovia will be changed from 50 million yuan to 500 million yuan. In addition, the subsidiary has invested 10 billion yuan to build 2.3 million tons of new energy and polymer materials industrialization projects, with a total construction period of 60 months.

Comments:

Large-scale investment in the construction of new energy and polymer materials projects, the company color masterbatch, lithium diaphragm production capacity is expected to expand steadily. The company plans to invest 10 billion yuan to build 2.3 million tons of new energy and polymer materials industrialization construction project. The first phase of the project is expected to invest 3 billion yuan. Construction of 900,000 tons / year sulfuric acid plant, 200,000 tons / year titanium dioxide plant, 300,000 tons / year high-end plastic color masterbatch plant, 600,000 tons / year ferrous sulfate plant The second phase is expected to invest 4.5 billion yuan to build 1.2 million tons / year sulfuric acid plant, 300,000 tons / year titanium dioxide plant, 500,000 tons / year high-end plastic color masterbatch plant, 900,000 tons / year ferrous sulfate plant; the third phase is expected to invest 2.5 billion yuan, build 1.5 billion square meters / year power lithium battery diaphragm production line. The main products of the project are sulfuric acid, titanium dioxide, high-end plastic color masterbatch, ferrous sulfate, power lithium battery separator, etc., among which titanium dioxide is the direct raw material of white masterbatch, which is the main product of the company. the completion of the project will help to reduce the uncertainty caused by the price fluctuation of titanium dioxide to the company's performance and enhance the company's integrated production capacity. The by-product of the plant is ferrous sulfate, which can be used as an intermediate raw material for the production of new energy materials such as iron phosphate and Prussian blue; the steam generated by the sulfur-based sulphuric acid plant can be used in the third phase of the project wet diaphragm production, and the company's lithium diaphragm production capacity continues to expand.

In addition, the construction period of the project is 60 months, the construction period of the first phase is 30 months, and the trial production is expected by the end of June 2025; the construction period of the second phase is 12 months, which is expected to be trial production by the end of June 2026; and the construction period of the third phase is 18 months. Trial production is expected by the end of 2027.

In-depth layout of color masterbatch, fine chemicals, lithium diaphragm three plates, optimistic about the company's long-term development. Color masterbatch plate, the company's annual production capacity of color masterbatch is about 90,000 tons, the company is constantly consolidating the competitive advantages of various products in the middle market, and gradually break through the monopoly of international leading enterprises in the high-end product market, and expand the market share of high-end products. In terms of fine chemicals, the company's holding subsidiary Yingchuang Sanzheng is the leading enterprise in the domestic and global cyanuric chloride industry, with an annual production capacity of 90,000 tons. In terms of diaphragm, Anhui Meixin, the company's holding subsidiary, has 150 million tons of wet diaphragm capacity put into production, and another 150 million tons of wet diaphragm capacity will soon be completed and put into production, with a total capacity of 300 million tons gradually released in the second half of 2022. Another planned capacity of about 1 billion tons is under construction one after another. According to the company announcement, the company's diaphragm product shipments in 2022 and 2023 are expected to be 50 million square meters and 400 million square meters respectively. In addition, in terms of melt-blown nonwovens, the company's two new spunlaced nonwovens and protective clothing nonwovens production lines have been put into production, with an annual production capacity of about 2000 tons, successfully contributing to the national epidemic prevention and control work.

Prospective layout of sodium cathode material Prussian blue (white) series products, the cost advantage of raw materials is significant. The company's forward-looking layout of sodium electricity. On August 8, 2022, the company and other investors increased the capital of Huanai New Materials with a total investment of 45 million yuan. after the capital increase is completed, the company will hold a 7% stake in Huanai New Materials. China Sodium New Materials is mainly engaged in the research and development and sales of sodium battery cathode materials, and this participation will help the company to develop the business of sodium electric materials. At the same time, the company is laying out the Prussian blue (white) series of positive materials for sodium ion batteries to promote the development of the sodium ion battery industry. On September 19, 2022, the company signed a "Strategic Cooperation Agreement" with Qicai Chemical to jointly invest 2.5 billion yuan in the construction of the "annual production capacity of 180000 tons of battery-grade Prussian Blue (White) Project". The project is planned to be built in three phases. The first phase, the second phase and the third phase are proposed to build 1, 5 and 120000 tons of production units respectively, and the first phase is expected to be completed and put into production by the end of 2023.

The technical level of the company is excellent. At present, the 50-ton pilot production line of Prussian blue cathode material has been put into production, and has passed the test of some battery manufacturers. In addition, the company's holding subsidiary Yingchuang Sanzheng layout has a production capacity of 300000 tons of liquid sodium cyanide, which can provide raw materials for the project, self-sufficiency, significant cost advantages, and is expected to contribute considerable profits in the future.

Earnings forecast, valuation and rating: the company's in-depth layout of color masterbatch, fine chemicals, lithium diaphragm three major plates, we are optimistic about the company's future growth momentum. Therefore, to maintain the company's 22-24 profit forecast, it is estimated that the return net profit of the company from 2022 to 2024 will be 324,000,000 yuan, 463 million yuan, equivalent to 1.22 yuan per share, and the "overweight" rating will be maintained.

Risk hint: the progress of project approval is not as expected, and the progress of new production capacity is not as expected.