The company is the leader of the soda process, benefiting from the rising prices of soda ash and ammonium chloride: the company has a production capacity of 1.8 million tons of soda ash and 1.8 million tons of ammonium chloride, Yingcheng base exploits group salt resources at low prices, and Chongqing base has the ability of raw salt self-sufficiency. The price of soda ash has risen from 1290 yuan in July 16 to 2250 yuan / ton at present, and the price of ammonium chloride has increased from the lowest 330yuan / ton to 570yuan / ton at present.
The rising price of ammonium chloride reverses the declining trend of the combined alkali process: in the two major production processes of soda, the product of the ammonia-alkali method is soda ash + calcium chloride, and the product of the combined alkali process is soda ash + ammonium chloride. There is calcium chloride solid waste pollution in ammonia-alkali method, but the profitability of ammonia-alkali method is better than that of combined-alkali method when ammonium chloride is less than 400 yuan per ton. this round of ammonium chloride price increases with urea from a minimum of 330 yuan / ton to 570 yuan / ton, reversing the declining trend of combined-alkali method. at present, the profit of the combined-alkali method is better than that of the ammonia-alkali method, and it is expected to be maintained in the future.
The edible salt business is expected to benefit from the liberalization of the salt monopoly: the company, Chongqing Soter, is qualified for the designated production of salt, with a production capacity of 1.3 million tons and the best quality well salt. It has sold about 130000 tons of edible salt to the salt industry company in the past 16 years, and the company has actively stored before the salt reform, and now it has developed three major brands. at the same time, it has docked with the surrounding food processing plants, Shang Chao and so on. We expect a substantial increase in production and sales for the whole year after the opening of the salt monopoly on January 1, 17.
Additional issuance to carry out energy-saving transformation of coal gasification, reduce cost and increase efficiency: the company announced that it will issue no more than 100 million shares at 8.08 yuan per share and raise 800 million yuan for the energy-saving transformation of coal gasification in Hubei and Chongqing pure alkali production bases. After years of development, the coal gasification process of the company has been relatively backward. According to the feasibility study, it will save 400 million kilowatt-hours of electricity, 160000 tons of standard coal and more than 200 million yuan in cost after the coal gasification transformation.
Investment suggestion: we expect the EPS of the company from 2016 to 2018 to be-1.29,0.57 and 0.83 yuan respectively. The company's operating inflection point is now present, with 16 years of baggage and 17 years of light travel. We give the Buy-An investment rating, with a 6-month target price of 11.40 yuan, which is equivalent to the dynamic price-to-earnings ratio of 20 in 2017.
Risk hint: the risk of falling soda ash price, ammonium chloride price, etc.