BL potash E_ fertilizer outside of Taiwan picked up by [Ry], reflecting the cost support of marginal producers. Recently, we have observed that Belarus proposed production cuts, reflecting pressure on its profits. Specifically, according to the latest report by the Belarusian State News Agency on November 4, Belarusian President Alexander Lukashenko proposed to coordinate with Russian fertilizer producers to cut potash fertilizer production by 10% to raise market prices. After this incident, overseas potash prices have already been reflected to a certain extent. According to Baichuan, on December 26, 2024, the prices of former Soviet fob and Vancouver fob of potassium chloride were 215 US dollars/ton and 232 US dollars/ton, respectively, with month-on-month increases of 13.2% and 8.4%, respectively. Different potash producers face different production costs, and marginal producers' costs will determine global market prices. Belarus and Russia have been affected by geopolitics, and logistics costs have increased significantly. Belarus's proposed production cuts reflect its profit pressure at current prices. There is reason to think that Belarus may be the current marginal producer of potash fertilizer. Furthermore, Belarus and Russia are important global suppliers of potash fertilizer, and if implemented, their actions to reduce production will have an important impact on global potash prices. Therefore, we believe that current potash prices will be supported.

New international potash projects continue to advance, and potash production is expected to continue to increase. The company's potash production continued to grow. In the first three quarters of 2024, the company's production and sales volume of potassium chloride products were 1.32 million tons and 1.24 million tons, respectively, +12.5% and 4.3% year-on-year. Among them, Q3 production was 0.46 million tons, +11.5% year over month, and sales volume was 0.38 million tons, -10.2% year over month, -32.4% month on month. The third quarter was affected by the typhoon weather in Southeast Asia, and port shipments were limited, resulting in about 0.08 million tons of products sold in transit that failed to confirm revenue. New projects also continue to advance. Currently, the company is working on 2 #主斜井原出水点周边进行地层加固工作基本完成，目前已开始井筒内的清淤和检查工作。 The company is making every effort to speed up 3 #主斜井的井下贯通工作，并积极推进后续皮带运输设备的安装准备工作。 The Xiaodongbu mining area currently includes the construction of 2 wind wells, 1 ramp and 1 main inclined well. The construction work on two of these wind wells has been completed, and other well construction work is progressing actively in an orderly manner. As the second million-ton potash project and the third million-ton project in the Xiaodongbu mining area continue to advance, the company's potash production is expected to continue to increase in the future.

First coverage, giving a “buy” rating. Potash prices are bottoming out, and marginal producers' actions to cut production are expected to raise prices. Furthermore, the company's potash production expansion plan is clear, future growth is remarkable, and the current progress of the company's potash fertilizer project has improved. We expect the company to achieve operating income of 3.48, 6.16, and 8.27 billion yuan in 2024-2026, and net profit of 0.71, 1.25, and 1.79 billion yuan, corresponding to PE of 27, 15, and 11X, respectively. First coverage, giving a “buy” rating.

Risk warning: Potash prices fall, production capacity investment falls short of expectations, profit forecasts fall short of expectations