Jinchi Chemical has been put into production smoothly and has become a major contributor to the company's performance growth in the first half of the year. In the first half of the year, the company realized operating income of 1.1251485 billion yuan, an increase of 22.59% over the same period last year, and a total profit of 75.6461 million yuan, an increase of 24.05% over the same period last year. The company's revenue and profit growth in the first half of the year, in addition to the strong trend of the urea industry and the enhancement of urea profitability in the first half of the year, another important factor is the smooth commissioning of Jinchi Chemical, a fund-raising project, resulting in a substantial increase in urea production. The company produced a total of 319800 tons of urea in the first half of the year, an increase of 99.75% compared with the same period last year, of which: the parent company produced 127000 tons of urea, down 20.67% compared with the same period last year; since the trial production of Jinchi Chemical Industry in January 2012, trial production of 192800 tons of urea, accounting for 64.52% of the total urea output in the first half of the year, has become the main power source of the company's performance growth last year.
It is intended to transfer Tianfu Chemical, get rid of the financial burden and concentrate on the development of Jinchi Chemical.
In the era of high oil prices in 2006, DME, as the representative of clean fuel, was regarded as the best substitute for gasoline fuel. There was an upsurge of DME construction in the market, and DME construction reached its peak in 2007. Later, the whole industry was in a state of serious surplus. At that time, in order to cope with the rising price of natural gas and insufficient supply of raw materials, and to make full use of the rich advantages of local coal resources in Guizhou, the company raised funds to invest 2.6 billion yuan to build an annual production capacity of 300000 tons of synthetic ammonia and 150000 tons of dimethyl ether coal chemical project. however, since the trial production of the project in 2010, due to a variety of production plant instability and other reasons, the project is in an intermittent state of production and losses are relatively serious. In order to concentrate effective resources and fully support Jinchi Chemical, the company decided to transfer Tianfu Chemical.
Tongzi Huaizi Coal Mine will greatly alleviate the risk of insufficient natural gas supply and rising prices in the future.
Guizhou Tongzi Huaizi Mining Co., Ltd., a 49%-owned joint venture, has a mine design production capacity of 600000 tons / year and a service life of 40 years. The total investment of the project is 440 million yuan. As of June 30, 2012, the project has completed a total investment of 40.7552 million yuan, accounting for 9.26% of the total planned investment. It is expected to be completed and put into production in 2014, and will begin to provide raw coal for the company. At that time, part of the raw material problem of Jinchi Chemical will be solved, and the risk of insufficient natural gas supply and rising prices of the company will be greatly alleviated at the same time.
Give a "highly recommended" rating for the first time. Regardless of the future transfer of Tianfu Chemical's equity, we predict that the company's EPS from 2012 to 2014 will be 0.15,0.21 and 0.27 yuan respectively, and the company's current share price is 3.98 yuan, corresponding to a PE of 26 times, 19 times and 15 times, respectively.
Considering that in the future, if the company transfers its stake in Tianfu Chemical, it will greatly ease the financial pressure and concentrate on the development of Jinchi Chemical, the company's profitability will be greatly improved, giving a "highly recommended" rating for the first time.
Risk tips: the risk of insufficient natural gas supply and rising prices, a sharp decline in product prices, a sharp rise in raw materials, and so on.