Event description

On January 18, Chuanheng Co., Ltd. issued a pre-increase announcement on 2022 performance. The company is expected to achieve a net profit of 700.85 million yuan in 2022, an increase of 90.34% to 131.13% over the same period last year, and an estimated deduction of 71mm to 860 million yuan in non-return net profit, an increase of 106.72% and 150.39% over the same period last year.

The company's annual performance hit a record high, and the prices of its main products rose.

The company's performance has increased significantly compared with the same period last year, and its resource advantages have been brought into full play. In 2022, the company is expected to achieve a net profit of 700.85 million yuan, an increase of 90.34% and 860 million yuan, an increase of 90.34% and 860 million yuan, respectively, an increase of 106.72% and 150.39% over the same period last year. In a single quarter, the net profit of Q1-Q4 in 2022 was 104 million yuan, 267 million yuan, 219 million yuan and 111 million yuan, respectively, an increase of 205.13%, 277.75%, 103.98%,-28.97%, 67.25% and 19.24%, respectively, compared with the same period last year.

On the demand side, since the fourth quarter of 2022, the inventory of chemical fertilizer market has been eliminated, and the demand for spring ploughing and fertilizer preparation has been gradually released in the first quarter. At the same time, it is expected that food prices will remain high and volatile in the next 2-3 years, and the tight global supply and demand will affect phosphate fertilizer prices easily. New energy materials such as lithium iron phosphate and lithium hexafluorophosphate provide incremental demand for phosphate rock. On the supply side, the phosphorus chemical industry as a whole is affected by resources and policies, and there is almost no new production capacity in the industry. The property of phosphate rock resources is prominent, and ore ownership is the king. For the whole year, the company's main chemical products and phosphate rock sales prices increased, operating income increased, and chemical products and phosphate rock gross profit margin increased compared with the same period last year, so the company's performance increased year-on-year.

The acquisition of phosphate rock has been completed many times, and the advantage of upstream phosphate rock resources is highlighted.

On January 4, the company announced that it would increase the capital of its subsidiary Hengda Mining by 190 million yuan. After the capital increase is completed, the registered capital of Hengda Mining has increased from 300 million yuan to 490 million yuan. In 2022, the company completed the acquisition of Fuquan Phosphate Mine; financing for the new 2.5 million tons / year mining project of Jigongling Phosphate Mine; the mining depth of Xiaoba phosphorus Mine held by Fulin Mining increased by 300 meters, and the phosphate ore reserves increased, and the production scale increased from 500,000 tons / year to 800,000 tons / year. At present, the company has 2.8 million tons / year production capacity of Xiaoba and Xinqiao phosphate mine, and the long-term production capacity will be 1030 million tons / year. The expansion of phosphate rock capacity helps to improve the control and guarantee ability of phosphate rock resources upstream of the production base, and brings greater advantages for the production of downstream phosphorus chemical products of the company.

Non-public offering of shares to build a number of projects, new energy materials accelerated landing on September 30, 2022, the company announced that it planned to issue no more than 100 million shares and raise no more than 3.529 billion yuan, of which 1.201 billion yuan was used for "120,000 tons / year food grade phosphoric acid purification project by comprehensive utilization of low and medium grade phosphate ores" and 609 million yuan for "100,000 tons / year food grade phosphoric acid purification project". 719 million yuan for "Jigongling phosphate mine new 2.5 million tons / year mining project", 200 million yuan for supplementary working capital, 800 million yuan for repayment of bank loans. This construction project will further expand the company's phosphate mining capacity, expand the company's phosphoric acid purification capacity, improve the comprehensive utilization efficiency of medium and low-grade phosphate ores, enrich the product structure of the phosphorus chemical plate, and improve the layout of the company in the new energy source industrial chain. The company continues to distribute new energy materials such as iron phosphate, lithium hexafluorophosphate and lithium iron phosphate, and has signed cooperation agreements with the people's governments of Fu'an and Weng'an with a total investment of 17 billion yuan. the production lines of 1.6 million tons / year battery iron phosphate and 200,000 tons / year battery grade iron phosphate, 20,000 tons / year lithium hexafluorophosphate and 100000 tons lithium iron phosphate will be built in the long term. In addition, the company's iron phosphate project for 100kt/a batteries was successfully put into operation on September 16, 2022. Based on the advantages of its own phosphorus source, the company actively grasps the development opportunities of the new energy materials industry, and is expected to build the new energy materials into the company's second growth curve in the future, bringing new profit increments for the company.

Investment suggestion

According to the profit forecast adjusted according to the pre-increase announcement of the company's performance, the company's net profit from 2022 to 2024 is expected to be 8.36,12.94 and 1.925 billion yuan respectively (the original value is 8.64,12.66 and 1.83 billion yuan respectively), with year-on-year growth rates of 127.4%, 54.7% and 48.8%. The corresponding PE was 17, 11 and 7 times, respectively. Maintain a "buy" rating.

Risk hint

(1) the risk that the project production schedule is not as expected.

(2) the risk that the project approval progress is not as expected.

(3) the risk of a sharp fall in product prices.

(4) the risk of large fluctuations in raw material prices.

(5) the risk that the downstream demand is lower than expected.