The company is a cost leader in integrated salt gas chemicals. Relying on its own salt mine with 98 million tons of salt ore reserves and natural gas supply advantages in the southwest region, the company has formed an annual production capacity of 1.1 million double tons of bisalkali (soda ashe+ammonium chloride), 465,000 tons of glass, 4.3 million square meters of coated glass, 150,000 tons of diglyphosate, and 50,000 tons of glyphosate (as of the 2021 semi-annual report). Benefiting from good cost control, the company's total cost is significantly ahead, and net interest rates lead the industry. In the short term, the supply and demand pattern of the company's original main business was good, maintaining a high level of prosperity. In the medium to long term, the company will use photovoltaic materials as the next concentrated driving force, and is expected to start a second growth curve after the new business is concentrated and put into operation in 2022.
Concentrate efforts on entering photovoltaic materials, and improve valuation to promote growth. Photovoltaics is the renewable and clean energy source with the best development prospects in China. It is an important path to achieve “carbon neutrality and carbon peaks”. China has become the global PV supply center, and in the future, new global PV installations will continue to drive China's demand for materials such as photovoltaic glass and silicon wafers. In this context, the company concentrated on entering photovoltaic materials:
Photovoltaic glass: Driven by photovoltaic installations and the penetration of double glass, China's demand for photovoltaic glass is expected to grow to 16 million tons in 2025. Relying on upstream soda ash production capacity, the company has invested in Chongqing to produce 8 GW of photovoltaic glass per year this year and Panzhihua in 2022 to build an integrated industrial chain of raw salt, soda ash and photovoltaic glass, which will have significant cost advantages and industrial chain synergies.
Ultra-efficient N-type photovoltaic silicon wafers: N-type batteries have high conversion efficiency compared to P-type batteries, and are currently at a penetration inflection point. As equipment is localized, non-silicon costs continue to decline, and conversion efficiency continues to improve, it is estimated that N-type batteries will account for 25-30% in 2025, bringing greater demand for N-type silicon wafers. The company and Tong Xingxue, former chairman of Saiwei LDK, jointly invested in the 10GW N-type silicon wafer project to seize the opportunities of the era where battery technology iteration forced silicon iteration. As the company's photovoltaic glass and high-efficiency N-type silicon wafers are put into production in 2022, photovoltaic materials are expected to help the company increase its valuation and accelerate growth.
The glyphosate pattern is booming, and the company will benefit as the largest IDA method manufacturer in China. New opportunities for domestic cultivation of genetically modified corn and soybeans are expected to open up, and glyphosate will benefit from glyphosate as the world's mainstream pesticide that is resistant to properties. Moreover, the industry will add very little new production capacity in the future. Under the optimization of the supply and demand pattern, glyphosate will begin to enter a medium- to long-term profit cycle. The company is the world's largest supplier of diglyphosate and the largest manufacturer of IDA glyphosate in China. The cost advantage of the IDA method is significant compared to the glycine method. The diglyphosate-glyphosate business is expected to continue to contribute significantly to profits as the company lays out new businesses.
Profit forecasts and valuation recommendations. We expect the company's revenue for 2021-2023 to be 118.62/19243/26.348 billion yuan respectively; the net profit of the mother is 2,930/5221/6.570 billion yuan respectively; and the corresponding PE is 10.73/6.02/4.79 times, respectively. The company is an integrated salt gas chemical manufacturer. The main business maintains a high level of prosperity and is improving safety. At the same time, the centralized commissioning of the new business photovoltaic materials in 2022 is expected to increase valuations and open up room for growth. First coverage, giving a “buy” rating.
Risk warning: Product prices fell more than expected, and demand for photovoltaics fell short of expectations.