\u3000\u3000 Qingdao East Steel Tower Stock Co.Ltd(002545) (002545)
Core view
Steel structure and potash fertilizer industry are driven by two wheels. Qingdao East Steel Tower Stock Co.Ltd(002545) is a dual main industry listed company mainly engaged in steel structure and potash fertilizer business. In the steel structure industry, the company holds nearly 100 patents and is in the leading position in the industry. In terms of potash fertilizer business, the company has a capacity of 500000 tons of potassium chloride. In recent years, the company’s operating revenue has continued to increase. In the first three quarters of 2021, the company achieved an operating revenue of 2.022 billion yuan, an increase of about 4.62% over the same period last year. At the same time, the company’s gross profit margin is constantly improving. In the third quarter of 2021, the company’s gross profit margin is about 29.83%.
The mismatch between supply and demand is obvious, and potash fertilizer ushers in an upward cycle. With the gradual entry into force of sanctions against Belarus, the global potash supply has tightened simultaneously. Meanwhile, the international price of potash fertilizer has ushered in a rising cycle again after 12 years of continuous downturn. As of February 14, 2022, the FOB price of potassium chloride in Russia, Vancouver and northwest Europe had been reported at US $625.5/ton, US $610.0/ton and US $631.5/ton respectively, up 217.5%, 197.6% and 221.4% respectively compared with the beginning of 2021. Against the background of high prices, the company’s production costs are basically stable, so the upward cycle of potash fertilizer is expected to bring huge profit growth to the company.
The steel structure industry is growing steadily, and UHV construction drives the demand for iron towers. Steel structure construction has outstanding advantages, and driven by policies, the output scale has increased rapidly. In 2020, the company’s steel structure output has reached 89 million tons. In addition, the rapid development of photovoltaic wind power relying on UHV will increase the demand for UHV construction. Under the UHV construction goal of 24 AC and 14 DC in the 14th five year plan, China’s UHV lines will continue to be laid, and China’s iron towers will have a strong demand in the future. The rising demand for UHV iron towers and steel structure buildings will drive the steady development of the company’s steel structure business and bring stable benefits to the company. Overseas production capacity layout has obvious strategic advantages. The company is one of the first Chinese enterprises to deploy potash fertilizer business overseas. In December 2021, the company’s potassium chloride expansion project in Laos has been officially started, and the potassium chloride production capacity will be increased from the existing 500000 T / A to 1 million T / A. East Asia and Southeast Asia are highly dependent on the import of potash fertilizer. In 2019, the import of potash fertilizer in East Asia accounted for 30% of the total import volume of the world. The company accurately matches the needs of Southeast Asia and feeds back to China, saving a lot of costs from distance. With the advantage of overseas layout, the prosperity of potash fertilizer industry in the future is expected to open up growth space for the company’s performance.
Investment advice
As the potassium chloride industry continues to prosper, we expect the company to perform well in the future. It is estimated that the net profit attributable to the parent company in 2021, 2022 and 2023 will be RMB 426 / 661 / 784 million respectively, and the corresponding EPS will be RMB 0.34/0.53/0.63 respectively. Based on the closing price of RMB 11.07 on February 23, 2022, the corresponding PE will be 32.29/20.83/17.56. Combined with the prosperity of the industry, we are optimistic about the development of the company. For the first time, give a “strongly recommended” rating.
Risk tips
Repeated overseas epidemics, abnormal fluctuations in potash prices, changes in exchange rates, etc.
