Matters

The company released its semi-annual report in 2019. During the reporting period, the company achieved revenue of 522 million yuan, an increase of 7.11%, a net profit of 58 million yuan, an increase of 7.30%, and a net profit of 52 million yuan, an increase of 28.04%.

In the Q2 quarter, the revenue was 288 million yuan, up 3.92%; the net profit returned to the mother was 42 million yuan, up 105.38%; and the non-return net profit was 40 million yuan, up 120.74% from the same period last year.

Potassium tetrafluoroaluminate volume, doubling its quarterly performance

The company sold 21700 tons of aluminum grain refiner in the first half of the year, unchanged from the same period last year, but potassium fluoroaluminate sold 8800 tons, up 149.56%, and fluorite powder sold 9900 tons, up 51.74%. The profit increment mainly came from potassium fluoroaluminate and fluorite powder. In the Q1 quarter, the company's non-return net profit was only 13 million yuan, while the non-return net profit in the Q2 quarter increased to 40 million yuan, an increase of 120.74% and 207.69%. The single-quarter net profit and gross profit margin were both the highest since 2015. The company's sales of refiner in the first half of the year were the same as the same period last year, while potassium tetrafluoroaluminate began to be sold to electrolytic aluminum enterprises in the second quarter, resulting in a 1.5-fold increase in overall sales of potassium fluoroaluminate. Potassium tetrafluoroaluminate may be one of the main reasons for the company's single-quarter performance doubling.

The company and the electrolytic aluminum industry achieve a win-win situation, and potassium tetrafluoroaluminate is expected to accelerate its promotion.

The potassium tetrafluoroaluminate developed by the company is expected to partially replace aluminum fluoride (electrolytic aluminum additive). In the production of electrolytic aluminum, 20 kg / ton of aluminum fluoride is generally added, and now 10 kg / ton of aluminum fluoride + 10 kg / ton of potassium fluoroaluminate is mixed, which can save 500 kilowatt-hours of electricity without increasing the cost (the price is equivalent to that of aluminum fluoride). According to the calculation of 0.31 yuan per kilowatt-hour, it can increase the profit of 155 yuan / ton for electrolytic aluminum enterprises. For electrolytic aluminum enterprises, the use of potassium tetrafluoroaluminate thickening profits is considerable, so potassium tetrafluoroaluminate has achieved a win-win situation between the company and the electrolytic aluminum industry, and its application in the electrolytic aluminum industry is expected to accelerate promotion.

The space for growth opens, and the company will usher in a new leap.

According to the estimated output of 36.49 million tons of electrolytic aluminum in China and 64.34 million tons of electrolytic aluminum worldwide in 2018, assuming that 10 kg / ton of electrolytic aluminum is added per ton, the market space will reach 365000 tons in China and 643000 tons in the world.

From the current sales of potassium fluoroaluminate products, the promotion effect is remarkable. As an enterprise with raw materials, equipment, patents and other barriers, the company will take advantage of the east wind of the development of the industry and usher in a new leap.

Profit forecast and rating:

As the leader in the aluminum grain refiner industry, with the continuous expansion of the company's product scale and the accelerated promotion of by-product potassium tetrafluoroaluminate, it is estimated that the net profit from 2019 to 2021 will be RMB 3.01max 447 million, EPS 1.26max 2.19max 2.80 per share, corresponding to the closing price PE of 27x16x12X on August 27, 2019, maintaining the "overweight" rating.

Risk hint: the company's product production capacity releases the risk that it is not as expected, the promotion progress of the new product potassium tetrafluoroaluminate is not as expected, the risk of a sharp rise in the price of raw materials, and the risk that the production progress of the fund-raising project is not as expected.