The three major businesses are developing in parallel, a new chapter in Nirvana's new power spectrum. The company's traditional chemical business is divided into three main industrial chains: chlor-alkali chemicals, nitrogen fertilizer, and phosphate fertilizer. While the main business is developing in parallel, it has built an industrial chain system with perfect upstream and downstream coupling of mineral resources, chemicals, and chemical fertilizers. The company currently has a huge production capacity, including 840,000 tons of polyvinyl chloride (supporting 1.05 million tons of calcium carbide), 630,000 tons of caustic soda, 1.56 million tons of urea, 1.26 million tons of diammonium phosphate, etc. (not including the 20% shareholding in Yihua, Xinjiang). After 2017, the company began internal reforms, gradually divested its non-performing assets, and achieved a major change in management. On the basis of a reversal in governance, the company experienced an explosion in performance in 2021 along with the upward cycle of the main product boom. In 2021, the company achieved revenue of 18.54 billion yuan, +34.3% year on year, and achieved net profit of 1.57 billion yuan to the mother, +1255% year on year, a record high.

The fertilizer industry is booming, and the company's performance flexibility is remarkable. Since 2020, inflationary pressure compounded by supply shortages has pushed up agricultural product prices, while high food prices have further boosted the boom in the fertilizer industry. Currently, the prices of urea and ammonium phosphate are at historically high levels. Demand side fertilizer demand characteristics are remarkable, while the supply side's synthetic ammonia production capacity, phosphate ore resources, and the phosphorus chemical industry chain are all strictly controlled. We believe that the fertilizer industry will maintain a high level of prosperity. The company's urea production capacity is located in Xinjiang and Inner Mongolia, with obvious resource cost advantages; ammonium phosphate production capacity is located in Hubei, where transportation advantages are obvious while being close to phosphate resources; Jiangjiadun mining has 130 million tons of phosphate ore reserves and an annual production capacity of 300,000 tons (1.5 million tons/year mining license is still being processed). We are optimistic that the company's integrated advantage will bring significant performance flexibility to the company under the high boom in the industry.

Supply and demand in the chlor-alkali industry are improving, and the strong resource properties of calcium carbide are prominent. Domestic calcium carbide production capacity is gradually being phased out, and while real estate demand is expected to improve, BDO is contributing to emerging growth points, and calcium carbide is expected to maintain a high boom. The expansion of caustic soda production will slow down in the next 2 years, and it is expected that the overall balance will be tight. Furthermore, along with the rise in overseas oil and gas prices, overseas power generation costs have soared. Chlor-alkalization work is an industry that consumes a lot of electricity. There is a significant cost gap between domestic and foreign countries, which in turn brings a lot of room for arbitrage. At the same time, the differentiation of electricity prices between the eastern and western parts of the country has also brought room for arbitrage. The company's chlor-alkali industry is located in the western part of the country. It has perfect supporting facilities and obvious cost advantages, and is expected to benefit from the upturn in the chlor-alkali industry.

With resources on the left hand, new energy on the right, and the company's development on both sides, future growth can be expected. The company has sufficient reserves of resource-based chemicals such as phosphate ore, coal, calcium carbide, etc., and continues to expand downstream new energy and materials industry chains based on location advantages. In the west, the company has built a chlor-alkali chemical industry chain with strong resource and cost advantages; in Yichang, Hubei, it is expected that the company will continue to build a phosphorus-fluorine fine chemical industry chain, deepen cooperation with downstream, and continue to transform into new energy and new materials industries.

Investment proposal: The company is expected to achieve revenue of 224.31/225.67/25.068 billion yuan in 2022/2023/2024, respectively, and achieve net profit of 31.49/33.23/3.805 billion yuan. The corresponding EPS is 3.51/3.70/4.24 yuan respectively, and the corresponding PE is 6.6x/6.3x/5.5x respectively. Referring to comparable company valuations, taking into account the company's long-term growth and potential to enter downstream emerging fields, the company was given 9 times the target PE in 2022, corresponding to the target price of 31.59 yuan, covered for the first time, and given a “strong push” rating.

Risk warning: Project progress fell short of expectations; international oil prices fluctuated sharply; global epidemic prevention and control fell short of expectations; changes in safety and environmental protection policies; intensification of trade disputes between China and the US, etc.