Incident: The company announced the construction of a 600,000-ton pre-baked anode carbon project with Geely Baimine in Tiandong County, Baise City, Guangxi Zhuang Autonomous Region to meet the demand for pre-baked anode products in Geely Baimine and the southwest region.
The 600,000 tons/year pre-baked anode project has been launched, and the partners are strong. According to the announcement, the company signed a list of investment terms with Geely Bai Mining and Tiandongbai Mining to increase the capital of Tiandongbai Mine, using the company as the implementing entity to build a 600,000 tons/year pre-baked anode carbon project in Tiandong County, Baise City, Guangxi Zhuang Autonomous Region to meet the demand for pre-baked anode products in Geely Baimine and the southwest region. 1) After the capital increase is completed, Suotong Development and Geely Baiguang will hold 66% and 34% of the shares in Tiandongbai Mine respectively. 2) The total investment of the project is about 1.68 billion yuan. After completion, the project is expected to achieve an annual output value of 4.5 billion yuan and an annual tax payment of more than 150 million yuan. 3) Geely Baikuang Group was originally a state-owned enterprise in Baise City. It is a major lignite production base in Guangxi and an important manganese carbonate base in the country. In 2019, the Guangxi Autonomous Region and Baise Municipal Governments introduced Geely Technology Group to carry out mixed ownership reform of Baiguang Group, and became a typical example of the “Double Hundred Action” of state-owned enterprise reform. After the mixed reform, Geely Baimining Group invested and operated more than 30 enterprises. Currently, Geely Baimining Group is owned by Geely Technology Group and Guangxi Baise Industrial Investment and Development Group respectively, and has four major industrial clusters: aluminum smelting industry, energy industry, aluminum processing industry, and manganese industry.
The company is the world's largest supplier of commercial pre-baked anodes, and focuses on benefiting from trade-in plus new quality productivity. According to our analysis, equipment renewal is not simply replacing old products with new products, but rather actively reshuffling the industry to allow leading companies with leading product technology to seize more share and increase the autonomous and controllable ratio; new quality productivity refers to transforming and upgrading traditional industries with new technology, new methods, and new ideas; therefore, equipment updates and the introduction of new quality productivity mean that policymakers have realized overcapacity in traditional industries, promoted a new round of supply-side reforms, and used supply to create demand. As the world's largest supplier of commercial pre-baked anodes, the company bucked the trend and became apparent at the bottom of the industry cycle. Change Key beneficiaries of new+new quality productivity.
Profit forecast: We predict that in 2023-2025, the company's EPS will be -1.12, 0.77, and 1.31 yuan, respectively, and PE will be -12, 17, and 10 times, respectively, maintaining a “buy” rating.
Risk warning: Product prices and gross margin continue to decline due to declining industry demand and increased competition.