Event

The company released its annual report in 2019. During the reporting period, the company realized revenue of 1.034 billion yuan, down 6.00% from the same period last year; realized net profit of 94.2689 million yuan, down 24.64% from the same period last year; realized net profit of 78.7493 million yuan, down 19.30% from the same period last year; and the corresponding EPS was 0.59 yuan per share.

Main points of investment:

The decline in production and sales of major products has led to a decline in performance: in 2019, due to global macroeconomic pressure, rising risks at home and abroad, market competition and other factors, the prosperity of industries such as aluminum is insufficient, and the production and sales of the company's main products have declined. The production and sales of aluminum grain refiners, the main products, were 43300 tons and 42700 tons respectively, down 4.11% and 5.68% respectively from the same period last year. The annual sales of by-product potassium fluoroaluminate was 16700 tons, down 12.02% from the same period last year; the annual sales of fluorite powder was 14400 tons, down 33.26% from the same period last year. Affected by this, the company's revenue and profits have declined to a certain extent.

Continue to improve the layout of the industrial chain and improve the gross profit margin of products: the company has built the only industrial chain of fluorite mining, fluorine salt material manufacturing and light alloy material processing in the world, which has the advantage of the whole industry. Huikai Chemical Phase II expansion project of 30,000 tons of anhydrous hydrogen fluoride has been put on record. After completion, the company will have a production capacity of 50,000 tons of anhydrous hydrogen fluoride, which is expected to reduce the cost of aluminum grain refiner from raw materials and increase product gross profit margin.

The company intends to issue convertible bonds to raise funds into the project, which is expected to bring performance increment: the company intends to issue convertible bonds to raise funds of no more than 595 million yuan. It is used for projects with an annual output of 30, 000 tons of aluminum master alloy, 100000 tons of grain refiner for aluminum smelting, construction of engineering R & D center and supplementary liquidity. If the issue is successful, the company's performance is expected to be greatly improved after the completion of the project.

Profit forecast and investment advice: from 2020 to 2022, the company's return net profit is expected to be 100 million yuan, 117 million yuan and 131 million yuan respectively, EPS is 0.63,0.73 and 0.82 yuan per share, corresponding to the closing price of 20.72 yuan PE is 33, 28 and 25 times, maintaining the "overweight" rating.

Risk factors: project construction is not as expected, the impact of the epidemic exceeds expectations, and demand is not as expected.