Report guide

Asia Potassium International released its 2023 annual report and 2024 quarterly report on April 29. In 2023, it achieved total operating revenue of 3.898 billion yuan, a year-on-year increase of 12.45%, and realized net profit of 1.274 billion yuan, a year-on-year decrease of 37.17%; of these, 2023Q4 achieved total operating income of 1.06 billion yuan, a year-on-year decrease of 4.42% and an increase of 15.77% month-on-month, achieving net profit without return to mother of 268 million yuan, a year-on-year decrease of 4.96%.

2024Q1 achieved total operating revenue of 633 million yuan, a year-on-year decrease of 25.89%, a year-on-month decrease of 37.08%, and realized net profit of 81 million yuan after deduction, a year-on-year decrease of 75.98% and a year-on-month decrease of 69.78%. The company's performance was in line with expectations.

Key points of investment

Production and sales volume, industry climate

Due to the sharp rise in potash imports, the supply of potassium chloride has increased, and the overall price of potassium chloride has declined. According to Baichuan Yingfu data, the average price of potassium chloride market for the full year of 2023 was 2924.31 yuan/ton, down 30.51% year on year; the average price of 2023Q4 potassium chloride was 2836.74 yuan/ton, down 21.79% year on year, up 12.39% month on month; 2024Q1 average price of potassium chloride was 2488.60 yuan/ton, down 29.95% year on year and 12.27% month on month; entering 2024Q2, the average price of potassium chloride in China bottomed out. As of April 29, the average price of potassium chloride in China was 2307 yuan/ton compared to this year The low level rose by 5.92%, and the industry sentiment is expected to recover. According to data from the General Administration of Customs, the import volume of potassium chloride in 2023 was 11.5723 million tons, up 45.84% year on year; of these, the 2023Q4 potassium chloride import volume was 3.5037 million tons, up 96.55% year on year, up 22.87% month on month; 2024Q1 potassium chloride imports were 3.836,800 tons, up 49.19% year on year, up 9.51% month on month. The profitability of low-priced products has been drastically reduced, and the company's year-on-year performance has been affected; the company's production and sales have continued to grow, which is expected to buck the trend. The company's output in 2023 was 1.6447 million tons, up 81.14% year on year; sales volume was 1.6062 million tons, up 76.47% year on year. Among them, 2023Q4 production was 470 million tons, up 13.28% month on month; sales volume was 416,1 million tons, down 1.77% month on month. 2024Q1 production was 430,000 tons, up 35.35% year on year, down 8.51% month on month; sales volume was 298,500 tons, up 12.51% year on year, down 28.26% month on month. 2024Q1 taxes and surcharges were $78 million, up 206.90% year on year. The main reason was the increase in import tariffs and resource taxes in the current period; the financial expenses of 2024Q1 were 9.988 million yuan, an increase of 375.52% year on year, mainly due to the increase in interest expenses in the current period.

The company has abundant potash resources, and cost reduction and efficiency are just around the corner

The company has three potash mines in Ganmon Province, Laos. It has a total of 263.3 square kilometers of potash rights, with potash ore reserves of more than 6 billion tons of potash ore and more than 1 billion tons of pure potassium chloride resources. It is the largest potash enterprise with the largest single resources in Asia and the largest potash fertilizer enterprise in Southeast Asia. With the company's rapid expansion of production capacity and release of production capacity, the scale effect will be further evident. At the same time, the company continues to innovate and continuously improve its management level. There is room for further reduction in potash fertilizer production costs in the future, and the company's cost advantage will increase.

Currently, the price of potassium chloride is low, and the profit pressure on the industry is high. The company has its own potash, which has a cost advantage, and is expected to remain profitable in a low economy.

Production capacity continues to expand, laying out a second growth line

Relying on its own advantages, the company continues to expand its potassium chloride production capacity, plans to build the “5 million tons/year potash fertilizer (potassium chloride) production capacity expansion project in Ganmon Province, Laos” and formulates a development strategy “at an expansion rate of 1 million tons of additional production capacity in a year” to form 5 million tons of potash fertilizer production capacity in 2025. Among them, the first 1 million tons/year potash project has already been put into production, and 1 million tons/year of potassium chloride production capacity has now been built. The second and three 1 million tons/year potash projects were successfully selected for testing. Potash projects are being planned It aims to achieve a production capacity of 5 million tons by 2025, and in the future, expand to 7-10 million tons/year of potash fertilizer according to market needs. In response to the strong demand for granular potassium, the company launched the Dahong Granular Potassium Expansion Project. The first 1 million tons/year potash project supporting the Dahong Granular Potassium Phase 1-3 project has been put into production, and 860,000 tons/year of Dahong Granular Potassium production capacity has been built. The fourth phase of the project to add 300,000 tons of granular potassium has now started, and the granular potassium production capacity will reach nearly 1.2 million tons after the project is successfully put into production. At the same time, the company is actively developing non-potassium resources and laying out a second growth line. The first non-potassium project of the participating company Asia New Materials Co., Ltd., was successfully put into operation and put into operation. It has now built 10,000 tons/year of bromine production capacity, striving to achieve a bromine production capacity of 5-7 thousand tons by the end of 2025, creating a new profit growth point for the company.

Profit forecasting and valuation

Due to the decline in profitability of cyclical products, the company's performance forecast was lowered; the company's revenue for 2024-2026 is estimated to be 43.91/71.38/11.558 billion yuan, respectively; the corresponding EPS is 1.77/2.73/3.55 yuan, respectively, and the corresponding PE is 10.74/6.96/5.36 times, respectively. The company is a leading company in the potassium salt sector. It is optimistic about the company's growth and maintains a “buy” rating.

Risk warning

Risk of production capacity investment falling short of expectations; risk of large fluctuations in product prices; risk of new product development; risk of safety and environmental protection; risk of policy changes, etc.