The phosphorus chemical industry chain is basically perfect, and the level of energy saving and environmental protection has become the company's core competitiveness.
After construction in recent years, the company's current phosphorus chemical industry chain is basically perfect. The company has built two major primary phosphorus product manufacturing bases in Xuanwei and Maitreya in Yunnan, as well as the phosphorus chemical deep processing product manufacturing base in Jiangyin Industrial Park. a total of 140000 tons of yellow phosphorus, 720000 tons of phosphoric acid, 170000 tons of sodium and 40, 000 tons of calcium hydrogen phosphate (25000 tons of new technology is expected to be put into production in the first half of this year). In addition, the company has begun to build several energy-saving and environmental protection projects, and the old factory area in Jiangyin will be closed and relocated within a few years; in the future, the company will become a phosphorus chemical production enterprise with a high level of energy saving, environmental protection and recycling process.
At present, most of the production of phosphoric acid in China still uses the production process of thermal phosphoric acid, which consumes about 14000 degrees per ton of yellow phosphorus, so the phosphorus chemical industry belongs to the traditional high energy-consuming industry in China. At present, high energy-consuming industries are undoubtedly the key industries restricted by the state, while Yunnan, Guizhou, Sichuan, Hubei and other traditional phosphorus chemical production provinces have already issued relevant regulations one after another to close small enterprises with low technical level, high energy consumption and high pollution. for example, Yunnan will gradually shut down yellow phosphorus production enterprises with a scale of less than 5000 tons per year. We believe that with the continuous promotion of energy conservation and emission reduction policies, the pollution control cost of high-pollution industries will be further increased, and the company's large-scale production equipment and high-level energy-saving equipment will become the core competitiveness of the company. The company expects that 3-4 energy-saving and environmental protection devices will be completed and put into production this year, which will increase the benefit of the company by about 70 million.
The southwest drought has a positive impact on the company. If the drought continues, the price of yellow phosphorus may soar.
We believe that the impact of southwest drought on the phosphorus chemical industry is very great, although the impact has not been fully reflected in product prices, but in the next few months, the impact of southwest drought will be increasingly apparent, such as the continuation of drought, yellow phosphorus prices are likely to soar. 75% of the domestic production capacity of yellow phosphorus is concentrated in Yunnan, Guizhou, Sichuan and Hubei provinces. Except Hubei, Yunnan, Guizhou and Sichuan have all been affected by drought. Take Yunnan as an example, about 70% of the yellow phosphorus enterprises in Yunnan Province are small and medium-sized enterprises, and the vast majority of them are produced by the power supply of small hydropower stations, so the industry is basically shut down in the case of water shortage.
We believe that the current stable price of yellow phosphorus is mainly due to seasonal analysis, March is still in the traditional dry period, the operating rate of yellow phosphorus under normal circumstances will not be too high, so although the operating rate of the industry is low, the market is still in the wait-and-see stage. However, this year is quite different from the historical situation. As a result of the once-in-a-century drought, many hydropower stations have even dried up in the reservoir area, so even if it rains in the future, it will be difficult to restore the water storage in the reservoir area to the normal water level in a short period in the future. therefore, when the flood season comes in the second quarter, even if the rainfall returns to normal, we expect the power generation to be lower than the normal year. In addition, if precipitation comes, post-disaster reconstruction work such as agricultural seed scrambling will also consume a lot of electricity, so we expect yellow phosphorus production enterprises, especially small and medium-sized enterprises, to maintain a low operating rate in the first half of the year. The current price is less likely to fall in the second quarter, if the drought lasts for another month, then we expect yellow phosphorus prices to rise rapidly by late April at the latest.
The impact of the drought on the company is relatively positive. As the company Xuanwei 80,000 tons of yellow phosphorus capacity is a self-provided thermal power plant, so the power supply is basically not affected by the drought. The power supply of 70% of the company's Maitreya base comes from the Leidatan Hydropower Station assets that the company is about to acquire from major shareholders. Although the power generation of the hydropower station has not returned to normal at present, if the precipitation resumes, the production of yellow phosphorus in Maitreya base can be restored. Therefore, we think that the impact of the drought on the company is relatively positive.
Private placement is conducive to the long-term development of the company, and fine extension downstream is the future direction.
The announcement will be used to purchase 55 per cent of Leidatan shares from major shareholders, a technical renovation project of 65000 tons of light calcium phosphate and supplementary working capital with a private issuance of 7.8 yuan. We believe that the additional issuance will enable the company to reduce related party transactions, ensure power supply, enhance the downstream product structure, ensure financial health, and be conducive to the long-term development of the company.
After completing the industrial layout of phosphorus-electricity-mine integration, the company's future development strategy will make use of its own first-mover advantages to expand the range of downstream fine phosphorus products such as high-grade phosphate, such as lithium iron phosphate mentioned in the annual report. At present, the company is the only enterprise in China to enter the global fine phosphorus chemical products supply chain system, and Procter & Gamble Co, Unilever and other large enterprises have been cooperating for many years. Under the background of the transfer of the world phosphorus chemical industry to China, the expansion of the company's industrial chain to the demand side will make the company's development sustainable.
Profit forecast
Without considering the IPO for the time being, we estimate that the EPS of the company in 2010, 2011 and 2012 will be 0.27,0.36 and 0.49 yuan respectively. Based on the optimistic expectation of the phosphorus chemical industry in the next 2-3 years and considering that the company has a good development momentum, we will be rated as "overweight" for the first time.