Events:
The company released its mid-year report in 2019 that its operating income in the first half was 522 million yuan, up 7.11 percent over the same period last year; net profit was 57.8543 million yuan, up 7.30 percent over the same period last year; net profit after deducting non-recurring profits and losses was 52.2995 million yuan, an increase of 28.04 percent over the same period last year; and the comprehensive gross profit margin was 22.68 percent, an increase of 2.79 percentage points over the same period last year.
Comments:
Potassium tetrafluoroaluminate volume, Q2 single-quarter performance growth. According to the financial report, the company Q2 deducted non-net profit of 39.51 million yuan in a single quarter, with a month-on-month growth rate of 208.9% and a year-on-year growth rate of 120.7%.
The reason lies in the amount of potassium tetrafluoroaluminate. In the first half of the year, the sales volume of potassium fluoroaluminate products was 8800 tons, an increase of 149.56% over the same period last year, and has been applied in electrolytic aluminum enterprises. Due to the strong profitability of potassium tetrafluoroaluminate, the company's comprehensive gross profit margin increased by 2.79 percentage points. At the same time, due to the construction of Luoyang production line and other reasons, the management cost increased by 6.01 million yuan, which caused a slight drag on the performance, but did not change the upward trend of the company's performance.
The company leads the world in technology, and the market share of aluminum grain refiner will gradually increase. The quality of aluminum grain refiner is determined by process and core equipment. The company leads the world in technology and equipment research and development, and the product quality is better than that of foreign leading companies. At the same time, the company is the only whole industry chain in the industry, and its cost advantage will further enhance its competitiveness. The transfer of production capacity to Luoyang can effectively reduce the cost of the company, and then the market share of the company will gradually increase with the production capacity of Luoyang.
The rapid increase of potassium tetrafluoroaluminate will bring greater performance flexibility for the company. The biggest pain point in the electrolytic aluminum industry is power consumption, accounting for 40% of the cost. Potassium tetrafluoroaluminate can increase current efficiency by 2%, thereby saving at least 500kWh per ton, with a potential industry space of 350000 tons in 2019. The company has applied for a patent for the preparation of potassium tetrafluoroaluminate, and its raw material potassium hexafluoroaluminate is a by-product of aluminum grain refiner, while the company is the leader of aluminum grain refiner, so both patents and raw materials are in the hands of the company. At present, potassium tetrafluoroaluminate has been ordered and applied industrially, which will bring greater performance flexibility for the company in the future.
To build an industrial ecology, high-purity hydrogen fluoride and SB powder are expected to create a new star. With R & D and innovation as the core driving force, the company first achieves the best in the field of aluminum grain refiner, and then carries out industrial extension on this basis to build the whole industry ecology. High-purity hydrogen fluoride and SB powder (further petroleum catalyst carrier) are currently dependent on imports, the company's current products have made a breakthrough, considering the market space, once mature will be expected to create a new star.
Investment and rating: we expect the company to have operating income of 1.5 billion, 1.866 billion and 2.315 billion yuan and net profit of 182 million, 247 million and 335 million yuan in 2019-2021, with a current market capitalization of 30.0,22.1 and 16.3 times PE, maintaining a "highly recommended-A" rating.
Risk tips: aluminum ingot price fluctuations, product promotion is not as expected, new projects are not as expected, and so on.