Description of the event
On May 21, the company issued an indicative announcement on the proposed construction of a battery chemical project in Louisiana and receiving investment incentives from the government. The company plans to use its wholly-owned subsidiary Xinzhoubang or another newly established holding company as the implementing entity to build a battery chemical project in Louisiana, USA.
Based on the preliminary investment plan submitted by the company, the relevant government departments in Louisiana believe that this project is in line with its industrial plan, and provide a series of incentive programs such as industrial tax relief, infrastructure construction subsidies, and high-quality employment plans for the implementation of this project to support the implementation of this project.
On the evening of May 29, Xinzhoubang issued an announcement on receiving the customer's “Notice of Supplier Selection”. Recently, the company received a “Notice of Supplier Selection” from an overseas battery company, and the company signed a written “Nomination Agreement” with the customer to supply lithium-ion battery electrolyte products to the customer from 2025 to 2030. On the evening of May 30, Xinzhoubang announced that its holding subsidiary had signed an “Electrolyte Supply Agreement”. Poland's Xinzhoubang signed a “ACCELETE SUPPLY AGREEMENT” with a famous European battery manufacturer, agreeing that Poland's Xinzhoubang will supply lithium-ion battery electrolyte products to customers from 2024 to 2035.
Domestic electrolyte prices have bottomed out, and continuing to push overseas is expected to increase the company's profitability. Due to the expansion and growth rate of production capacity in the domestic electrolyte market, competition in the industry has intensified. Coupled with fluctuations in the price of raw materials, the price of electrolytes continues to decline. According to Baichuan Yingfu data, the average domestic electrolyte price dropped to 21,000 yuan/ton in early 2024. As of May 29, 2024, the average domestic electrolyte price was 21,300 yuan/ton, and the gross profit per ton was 1058.41 yuan/ton. We believe that at present, domestic electrolyte prices and profit levels have bottomed out.
In view of the fierce competition in the domestic electrolyte market, the company actively promotes overseas base construction and customer development.
In terms of overseas base construction: The company's Polish base was successfully put into operation in the first half of 2023, enabling localized supply of electrolytes to Europe. US bases and the like are being prepared. On the evening of May 21, 2024, the company issued an announcement. Based on the preliminary investment plan submitted by the company, the relevant Louisiana government departments believed that the company's “New Zubon Louisiana Battery Chemical Project” was in line with its industrial plan, and provided a series of incentive programs such as industrial tax relief, infrastructure construction subsidies, and high-quality employment plans for the implementation of this project to support the implementation of this project. Among them, with regard to the Industrial Tax Relief and Incentive Program, the local government provided partial tax relief for up to 10 years for this project, with an estimated total value of $71.3 million.
Overseas customer development: In November 2023, Poland's Xinzhoubang signed a long order of about 1.1 billion euros with a German customer, agreeing to provide customers with lithium battery electrolytes from 2025 to 2034. On May 29, 2024, the company announced that it had received a “Notice of Supplier Selection” from an overseas battery company. The company and the customer signed a written “Nomination Agreement”. The agreement was that the company would supply lithium-ion battery electrolyte products to customers from 2025 to 2030, which is expected to increase the company's revenue by about 316 million US dollars from 2025 to 2030. On May 30, 2024, Poland's Xinzhoubang signed an electrolyte supply agreement with a famous European battery manufacturer to supply lithium-ion battery electrolyte products to customers from 2024 to 2035, which is expected to increase the company's revenue by about US$676 million from 2024 to 2035. With the construction of overseas bases and the development of overseas customers, the company's overall electrolyte profit situation is expected to continue to improve.
The fluorine chemical industry chain continues to improve, and there is broad room for long-term growth
The company continues to improve the layout of the fluorine chemical industry chain, steadily advancing the construction of two major Hysford and Heidford base projects around the tetrafluoroethylene and hexafluoropropylene industry chains. The high-end fluorine fine chemicals project (phase II) of the expansion project was successfully put into operation. The country's first kiloton next-generation environmentally friendly electrical insulation gas - perfluoroisobutyronitrile industrial production line was successfully tested and produced smoothly in Sanming Hisford to ensure that the product maintains a leading position in market cost and technology, laying a solid foundation for the steady and continuous growth of the company's business. At present, the company's first-generation product market share is stable, second-generation product market demand is strong, sales are growing rapidly, and marketing promotion of third-generation products is beginning to bear fruit. Looking forward to the future, as production capacity under construction is gradually completed and put into operation, it can effectively solve existing production capacity bottlenecks and improve the company's organic fluorine chemical industry chain layout. The company is expected to gain a higher market share in the future and open up room for long-term growth.
Investment advice
As a leading enterprise in the domestic electrolyte industry, the company has significant advantages in scale. At the same time, the company's organic fluorine chemicals and semiconductor chemicals are gradually entering a period of rapid release, and the future performance growth rate is impressive. The company is expected to achieve net profit of 1,235, 16.18, and 2,021 billion yuan from 2024 to 2026, respectively, and corresponding PE is 19X, 14X, and 11X times, respectively. Maintain the company's “buy” rating.
Risk warning
(1) Risks caused by price fluctuations of raw materials and major products; (2) production safety risks;
(3) Environmental protection risks;
(4) The project's commissioning schedule fell short of expectations.