Inner Mongolia Eerduosi Resources Co.Ltd(600295) Q4 performance slightly exceeded expectations

\u3000\u3000 Inner Mongolia Eerduosi Resources Co.Ltd(600295) (600295)

Events

The company released the performance forecast for 2021 on the evening of January 27. It is expected to realize the net profit attributable to the parent company of RMB 5.828 billion-6.328 billion in 2021, with a year-on-year increase of 279% - 314%; The net profit deducted from non parent company was RMB 5.756 billion to RMB 6.256 billion, with a year-on-year increase of 294% - 331%.

Commentary

Q4 performance slightly exceeded expectations. In 21 years, the net profit attributable to the parent company in q1-q3 was 3.712 billion yuan, and the net profit attributable to the parent company in Q4 was 2.116 billion yuan - 2.616 billion yuan, an increase of - 1% - 22% month on month. Affected by the market demand, the market sales prices of the company's main products such as coal, ferrosilicon and PVC increased significantly year-on-year. The company seized the market opportunity, continued to tap its internal potential, ensured the efficient operation of production, and greatly increased the company's performance.

Acquire 25% equity of Yongmei mining and enjoy investment income. Dianye Metallurgical Group, the holding subsidiary of the company, invested 2.987 billion yuan to acquire the 15% equity of Inner Mongolia Inner Mongolia Eerduosi Resources Co.Ltd(600295) Yongmei Mining Investment Co., Ltd. held by the investment holding group; Invested 1.991 billion yuan to acquire the 10% equity of Inner Mongolia Eerduosi Resources Co.Ltd(600295) Yongmei mining company held by Cashmere Group. After the acquisition, the equity structure of Inner Mongolia Eerduosi Resources Co.Ltd(600295) Yongmei mining company is dianye group and Yongmei Group Co., Ltd., accounting for 50% respectively. Inner Mongolia Eerduosi Resources Co.Ltd(600295) Yongmei mining company has completed the transfer procedures of industrial and commercial changes and other related assets for this transfer.

Small varieties of ferrosilicon PVC have high elasticity. After the completion of PVC phase II project in 20 years, the company has a PVC production capacity of 800000 tons, a calcium carbide production capacity of 1.6 million tons and a caustic soda production capacity of 600000 tons. The production and marketing scale of Shanghai Chlor-Alkali Chemical Co.Ltd(600618) ranks fourth in China and first in Inner Mongolia. The company has an annual production capacity of 1.6 million tons of ferrosilicon, with ferrosilicon production and sales accounting for 30%, ranking first in China; The power cost accounts for about 60% of the ferrosilicon production cost. The company's self supplied coal and self provided power plants have significant advantages in operating cost. It is estimated that every 100 yuan increase in the price of ferrosilicon products corresponds to a profit of 106 million yuan, with great performance flexibility.

Profit forecast & investment suggestions

According to the performance forecast for 21 years, the company benefited from the price rise of ferrosilicon and PVC, and raised the net profit attributable to the parent for 21-23 years by 72%, 73% and 75% to 5.858 billion yuan, 5.959 billion yuan and 6.045 billion yuan respectively, with corresponding EPS of 4.10 yuan, 4.17 yuan and 4.23 yuan respectively, and corresponding PE of 5 times, 5 times and 5 times respectively, maintaining the "buy" rating.

Risk tips

Ferrosilicon's capacity removal policy did not meet expectations, resulting in sharp price fluctuations; The pledge rate of major shareholders is high.

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