Company profile
Xianmei Resources is a Chinese manufacturer of tantalum and niobium metallurgical products, the main products are tantalum oxide and niobium oxide. Tantalum-niobium metallurgical products are widely used in downstream manufacturing of special alloys, chemical products, electronic ceramics, aerospace, high-end consumer electronics, national defense and cemented carbide and other high-tech industries. According to the burning knowledge consulting report, according to the total output of foreign sales, the company became the largest manufacturer of tantalum-niobium hydrometallurgical products in China for three consecutive years from 2016 to 2018, accounting for about 30.0%, 31.5% and 35.8% of the Chinese market, respectively.
Sino-Thai viewpoint
The future growth of China's tantalum-niobium metallurgical industry is considerable: the total output of tantalum-niobium hydrometallurgical products in China is expected to reach 6168.9 tons by 2023, with a compound annual growth rate of 7.3 per cent, according to the report. Production used for external sales is expected to reach 5210.1 tons in 2023, with a compound annual growth rate of 7.1 per cent. In the future, with the rapid development of high-purity products downstream industries such as high-end electronics industry and superconducting materials industry, the demand for high-purity tantalum-niobium metallurgical products may be driven.
In terms of operating performance: in the fiscal year 2016-2018 and as of August 31, 2019, the company's operating income was 220 million yuan, 310 million yuan, 510 million yuan and 400 million yuan respectively. The steady increase in revenue is due to the increase in overall sales volume and average selling price. Chinese customers account for nearly 90% of the revenue. The company has nine production lines to produce pentoxide products and potassium fluorotantalate. During this period, the actual production capacity of the two business lines is 608.1 tons, 820.2 tons, 1040 tons and 863 tons, 107.3 tons, 108.5 tons, 199.5 tons and 59 tons respectively. The production utilization rate was 96%, 114.7%, 87.4% and 73.1% respectively, 51.8%, 52.4%, 96.4% and 42.8% respectively, and the gross profit margin was 23.8%, 28.4%, 32.1% and 27.5%, respectively. The company's purchases from the five major suppliers accounted for about 72.1%, 52.9%, 53.7% and 65.3% of the purchases in the same period, respectively. The company's inventory includes raw materials, work-in-process and finished goods, accounting for 14.7%, 30.3%, 44.5% and 26.4% of the total current assets respectively, and the net interest rates are 11.3%, 12.6%, 15.0% and 12.8%, respectively.
Valuation: based on 300 million shares after the global public offering, the company's market capitalization is HK $6.7 billion to HK $870 million, which is lower than the average of Hong Kong equities. In 18 years, the price-to-earnings ratio of the company is about 7.6-9.9 times, which is in the industry average level; the price-to-book ratio is about 1.43-1.68 times, which is in the industry average. In terms of profitability, the 18-year ROE and ROA were 30.6% and 16.3% respectively, higher than the industry average. According to our statistics on the past performance of sponsors in the past year, 4 companies are up and down by 2. Considering that the company's downstream applications contain market hot concepts such as semiconductors, it may fluctuate a lot on the first day, so we give it a score of 58 points and a rating of "do not apply".
Risk tips: (1) macroeconomic impact, (2) procurement costs are denominated in US dollars, exchange rate changes, and (3) performance is greatly affected by product price fluctuations.
