\u3000\u3000 Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) (000893)
Events
According to the announcement on February 24, the reorganization of the company’s purchase of agricultural potassium resources is continuing. After the 1 million ton reconstruction and expansion project in Laos is recently completed, the company will submit it to the CSRC for review after fulfilling the necessary review procedures in accordance with relevant regulations.
Comments
The company’s production capacity is increasing rapidly. The company’s capacity in 2021 will be 250000 tons. After the reconstruction and expansion project is put into operation, the company’s capacity will increase to 1 million tons, four times the original. According to relevant announcements, the current 1 million ton reconstruction and expansion project has reached 80% of production. In addition, after the acquisition of agricultural potassium resources, the company plans to increase the production capacity of potassium chloride to 3 million tons within 3-5 years.
In view of factors such as Belarus sanctions, the global potash supply is in short supply. Belarusian potash exports account for 21% of the total global exports, while Belarusian exports are mainly through Lithuanian ports. At present, Lithuania has announced the termination of the potash transportation agreement between the state railway and Belarus. Due to the reasons of cost and transportation capacity, the appropriate transportation scheme for the export of potash fertilizer from Belarus has not been determined, the global supply and demand are mismatched, and the supply gap has been formed, driving the price of potash fertilizer upward.
Shenzhen Agricultural Products Group Co.Ltd(000061) the price rose and the demand for potash fertilizer increased steadily. From the beginning of 2020 to February 24, 2022, the CBOT futures settlement prices of corn, wheat and soybean increased by 76.5%, 65.2% and 75.9% respectively, and are still in the upward channel. Shenzhen Agricultural Products Group Co.Ltd(000061) the rising price has driven the improvement of farmers’ planting enthusiasm, thus driving the growth of potash demand.
With the advent of spring ploughing, the shortage of supply has intensified, and the price of potash fertilizer has risen rapidly. In 2022, the benchmark price of the large contract for the import of potassium chloride by sea was $590 / ton, an increase of $343 / ton compared with 2021. On February 21, the ex factory price of potassium chloride of China’s leading potash fertilizer Qinghai Salt Lake Industry Co.Ltd(000792) increased, and the main varieties increased by nearly 400 yuan / ton. Stimulated by spring ploughing in the northern hemisphere, the price of potassium fertilizer is expected to rise further.
Under the background of “rising volume and price”, the profitability of the company is expected to be greatly improved. In the production cost of the company in 2020, the proportion of materials, labor, manufacturing expenses, fuel power and transportation expenses is 40.3%, 13.1%, 26.2%, 8.4% and 11.9% respectively. The cost is relatively stable, so the gross profit per ton increases rapidly after the price increases. Superimposed on the growth of production capacity, the company’s profitability improved rapidly.
Investment advice
Given that the company’s new production capacity is about to reach production capacity and the price of potash fertilizer is expected to be high, we raised the company’s profit forecast. It is expected that the net profit attributable to the parent company in 2021, 2022 and 2023 will be RMB 853, 1724 and 1804 million respectively, and the corresponding EPS of the net profit attributable to the parent company will be RMB 1.13, 2.28 and 2.38 respectively. Optimistic about the development of the company and maintain the “strongly recommended” rating.
Risk tips
Repeated overseas epidemics, uncertainty of asset restructuring, fluctuation of potash price and change of exchange rate.
