Event: the company issued an announcement on the investment in sugar production line by subsidiary Cofco (Tangshan) Sugar Industry.
In 2023, the company will have a sugar refining capacity of 2.05 million tons per year, accounting for nearly 40% of China's total sugar imports. According to the company announcement, the company intends to bid for the "Caofeidian refined Sugar Project Phase II 150000 ton Annual Cotton (Sand) Sugar production Line Project". The investment amount is 190.93 million yuan. The project is scheduled to start in August 2021, the construction of the project is expected to be completed by the end of 2022, and production is expected to reach 2023. The internal rate of return (IRR) of the project is expected to be 12.79%, and the investment payback period is 9.31 years (including the construction period). By the end of 2020, the company has owned and is under construction sugar refining capacity totaling 1.9 million tons / year. If the implementation of the new project goes smoothly, the company's sugar refining capacity will reach 2.05 million tons / year in 2023. As a sugar importer, China imported more than 5 million tons of sugar in 2020, accounting for about 1 million tons of new sugar supply in China. The company's sugar refining capacity is expected to handle about 40% of the imported raw sugar, superimposing more than 1 million tons of the total management capacity of self-produced sugar. The company will supply a total of 5% of China's new sugar, further consolidating its position as the absolute leader of China's sugar industry.
China's sugar import volume has remained high since 2021, and the company's sugar refining capacity is expected to remain high. According to the General Administration of Customs, China's total sugar import in 2020 reached 5.26 million tons, an increase of 55.62% from January to May 2021. 1.61 million tons, an increase of 96%. The form of imported sugar products in China is usually raw sugar. The raw sugar is easy to transport and needs to be processed in the sugar refinery after landing. The company is the main channel of sugar import in China, and it is also one of the largest sugar import traders. Judging from the situation in the first half of 2021, the company's sugar refining business is expected to maintain a high operating rate under the background of the continued high sugar import volume in China.
At the same time, the quality of sugar products processed from raw sugar by "two-step method" is higher than that of white sugar directly produced by sugarcane by "one-step method", so it has higher added value. According to the 2020 Annual report, the company's sugar refining products mainly include raw sugar, white granulated sugar, cotton white sugar, brown sugar, refined sugar, brown sugar and sugar processing by-products such as granulated meal, molasses, etc., and can also customize different packaging specifications according to the needs of customers. According to the diversified needs of the market, the company also launched 400g high-grade white granulated sugar, 355g refined white granulated sugar, pure brown sugar, rose brown sugar, single crystal rock sugar, 350g polycrystal yellow rock sugar and Luohanguo flavor liquid sugar and other small packaging products.
Thus, we believe that the company's 2021 performance is expected to continue to benefit from the high operating rate of the sugar refining business and the volume and price increase brought about by the optimization of product structure.
Profit forecast & investment advice: on the basis of continuous optimization of fundamentals, the beneficiary domestic sugar gap continues to need to be replenished by imported sugar, and the upward sugar price will bring good flexibility to the company's performance. It is estimated that from 2021 to 2023, the company will achieve revenue of 218.29 million yuan, net profit of 9.46 billion yuan and net profit of 12.48 billion yuan, corresponding to 0.58 billion yuan per share of EPS 0.44 pound. Maintain a "buy" rating.
Risk hints: new project schedule is not up to expectation, policy change risk, sugar price fluctuation risk, exchange rate change risk, raw material supply risk