Another star variety in the context of carbon neutrality, there is plenty of room for ferrosilicon to elastic upward.
In September 2020, General Secretary Xi Jinping clarified China's goal of achieving carbon peak by 2030 and carbon neutrality by 2060. Guided by this policy, various regions have begun to rectify key energy consumption industries. Shandong Province's strict control of coke production capacity made coke the star variety of black in 2020. During the 13th Five-Year Plan period, energy consumption in Inner Mongolia rose rapidly, ranking backwards in various indicators, and the autonomous region began rectifying ferroalloy smelting, a key energy consumption industry. Policies include eliminating backward production capacity and raising electricity prices. At current prices, the cost of ferrosilicon per ton of steel is around 30 yuan, making it extremely resistant to rising ferrosilicon prices. Therefore, compared to the same policy context, Inner Mongolia's 13th Five-Year Plan is less effective in controlling energy consumption, and ferrosilicon accounts for a higher proportion of steel costs. Therefore, we think that compared to Shandong Province's control of coke production, Inner Mongolia will control ferrosilicon production more strictly. Once the relevant policies are strictly enforced, the price elasticity of ferrosilicon is greater than that of coke.
Ordos: Ferrosilicon faucets are flexible enough, chlor-alkali chemical production is expanding, beneficiaries along the cycle.
The company produces about 1.6 million tons of ferrosilicon, accounting for more than 30% of the country's production. It is an unmistakable ferrosilicon leader. At the same time, the company has coal and its own power plant. The cost of electricity is 0.25 yuan. It has a great cost advantage and is not affected by electricity allocation. The gross profit of a 2,000 yuan per ton increase in ferrosilicon prices can be extremely flexible. In addition, the company's PVC phase II was gradually put into operation in 2020, and the effective production capacity increased from 400,000 tons to 800,000 tons, which also contributed greatly to the increase in performance during the gradual full production process. Meanwhile, the cashmere garment business is also expected to gradually recover its share of export sales as the epidemic improves. The company's three main businesses all have obvious procyclical characteristics. The price elasticity of ferrosilicon and the elasticity of PVC production contributed greatly to the increase in performance.
Profit forecast and investment advice: We estimate that the company's revenue for 2020-2022 will be 22.231 billion yuan, 27.373 billion yuan and 29.250 billion yuan respectively. The corresponding net profit attributable to the mother is 1,744 billion yuan, 4,065 million yuan and 4.937 billion yuan respectively. The corresponding PE classification is 10/4.4/3.6. Using the 2021 performance as the valuation benchmark, corresponding to 10 times the valuation, the company's reasonable market value was 40.65 billion yuan, and the corresponding stock price was 28 yuan, covering the “buy” rating for the first time.
Risk warning: Policy implementation falls short of expectations
