Description of the event
On the evening of March 30, 2023, Chuanheng Co., Ltd. released its 2022 annual report. In 2022, it achieved revenue of 3.447 billion yuan, an increase of 36.26% over the previous year; Guimu's net profit was 758 million yuan, an increase of 106.05% over the previous year. The company achieved revenue of 992 million yuan in the fourth quarter, up 15.49% year on year and 14.14% month on month; Guimu's net profit was 169 million yuan, up 8.09% year on year and down 22.94% month on month.
The company's annual performance reached a record high, and the prices of its main products rose
The company's performance increased dramatically over the same period last year, making full use of its resource advantages. In 2022, the prosperity of the company's main products such as phosphate ore and calcium dihydrogen phosphate increased, prices rose, and the company's performance increased dramatically. According to Baichuan data, the average annual price of phosphate ore/calcium dihydrogen phosphate (MCP 22% feed) in 2021 was 498.26/3514.90 yuan/ton respectively. In 2022, the average annual price of phosphate ore/calcium dihydrogen phosphate (MCP 22% feed) rose to 898.51/4419.17 yuan/ton. Looking at the demand side, since the fourth quarter of 2022, stocks in the fertilizer market have been dissolved, and demand for fertilizer preparation for spring farming has gradually been released in the first quarter. At the same time, it is expected that food prices will remain high and volatile in the next 2-3 years. Tight global supply and demand will affect the easy rise and difficulty of phosphate fertilizer prices. New energy materials such as lithium iron phosphate and lithium hexafluorophosphate will increase the incremental demand for phosphate ore. Looking at the supply side, phosphorus chemicals as a whole are affected by resources and policies, and there is almost no new production capacity in the industry. The resource properties of phosphate ore are prominent. Ore ownership is king. The sales prices of the company's main chemical products and phosphate ores rose throughout the year, operating income increased, and the gross margin of chemical products and phosphate ore increased year-on-year, so the company's performance increased year-on-year.
The phosphate ore acquisition transaction was completed, and the upstream phosphate resource advantages continue to be expanded. On April 16, 2022, the company plans to finance a new 2.5 million tons/year mining project for the Jigongling phosphate mine. The construction period of the project is 4 years. On June 13, 2022, the company issued an announcement that the mining depth of the Xiaoba phosphate mine mining rights held by Fulin Mining increased by 300 meters, phosphate ore reserves increased, and the production scale increased from 500,000 tons/year to 800,000 tons/year. At present, the company already has a production capacity of 2.8 million tons/year for the Xiaoba and Xinqiao phosphate ore, and will have a production capacity of 10.3 million tons/year in the long term. On September 15, the company announced that the acquisition of Fuquan phosphate ore had completed the registration of real estate rights changes. The expansion of phosphate ore production capacity is conducive to improving the control and security capacity of phosphate ore resources upstream of the production base, bringing greater advantages to the production of downstream phosphorus chemical products in the company.
Non-public stock issuance has been invested in a number of projects, and new energy materials are being implemented at an accelerated pace. On September 30, 2022, the company announced that it plans to privately issue no more than 100 million shares, raising no more than 3,529 billion yuan, of which 1,201 million yuan will be used for the “comprehensive utilization of medium- and low-grade phosphate ore to produce 120,000 tons/year food-grade purified phosphoric acid project”, 609 million yuan will be used for “the new 2.5 million tons/year mining project at the Jigongling Phosphate Mine” and 200 million yuan will be used to supplement the flow flow Funds, 800 million yuan to repay bank loans. This construction project will further expand the company's phosphate mining capacity, expand the company's production capacity for purifying phosphoric acid, improve the efficiency of comprehensive utilization of medium- and low-grade phosphate ore, enrich the product structure of the phosphorus chemical sector, and improve the company's layout in the new energy industry chain. The company continues to deploy new energy materials such as iron phosphate, lithium hexafluorophosphate, lithium iron phosphate, etc., and has signed cooperation agreements with the Fu'an and Weng'an people's governments, with a total investment of 17 billion yuan to build 1.6 million tons/year of battery grade iron phosphate and 200,000 tons/year of battery-grade iron phosphate, 20,000 tons/year of lithium hexafluorophosphate and 100,000 tons of lithium iron phosphate production lines. In addition, the company's 100kt/a battery ferric phosphate project was successfully tested on September 16. Based on its own phosphorus source advantages, the company actively grasps development opportunities in the new energy materials industry. It is expected that new energy materials will become the company's second growth curve in the future, bringing new profit increases to the company.
Investment advice
The company's net profit for 2023-2025 is estimated to be 1,183, 1,466 million yuan, and 2.06 billion yuan respectively, with year-on-year growth rates of 56.1%, 23.9%, and 36.9%, respectively. The corresponding PE of the current stock price is 10, 8, and 6 times, respectively. The 2023 and 2024 results were reduced by 8.58% and 23.84% respectively from previous values (previous values of 2023 and 2024, net profit of the mother was 1,294 billion yuan and 1,925 billion yuan respectively), maintaining the “buy” rating.
Risk warning
(1) The risk that the project commissioning progress falls short of expectations;
(2) The risk that project approval progress falls short of expectations;
(3) The risk of a sharp drop in product prices;
(4) The risk of large fluctuations in raw material prices;
(5) The risk that downstream demand falls short of expectations.