Guizhou Redstar Developing Co.Ltd(600367) (600367)
The company is a leading enterprise of high purity manganese sulfate in China. In 2002, the company entered the manganese industry. After nearly 20 years of development, the main products are electrolytic manganese dioxide, high-purity manganese sulfate and some manganese ore businesses. The main business entities are Dalong manganese industry and two grandcompanies producing ore – Songtao Hongxing electrochemical mining and Wanshan Pengcheng mining. Current capacity: electrolytic manganese dioxide (EMD) 30000 tons / year, high-purity manganese sulfate 30000 tons / year (climbing) and manganese ore 250000 tons / year. In the first three quarters of 2021, the company achieved electrolytic manganese dioxide output of 19714 tons and high-purity manganese sulfate output of 15223 tons respectively. It is expected that the annual output will be 27313 tons and 20442 tons respectively.
High purity manganese sulfate is expected to increase 7 times in four years in the future. High purity manganese sulfate is currently used in ternary materials, benefiting from the rapid development of new energy vehicles. It is expected to make a rapid breakthrough in lithium manganate and lithium ferromanganese phosphate in the future. It will be well used in sodium battery cathode materials, lithium rich manganese based materials and cobalt free nickel manganese binary materials in the future, and take all the current and future new energy battery material systems. It can be said that the manganese source of lithium-ion battery mainly comes from high-purity manganese sulfate. If not, it should be converted from high-purity manganese sulfate. According to comprehensive calculation, the demand volume of high-purity manganese sulfate will reach 1.34 million tons in 2025, realizing a high-speed growth of 7 times in four years, with a compound growth rate of 70%, entering an unprecedented highlight moment in the industry.
The company is a leader in inorganic salt industry. The business mainly covers barium salt and strontium salt, including 290000 tons of barium carbonate and 55000 tons of barium sulfate, ranking first in China and even the world, with a market share of about 40%. In 2020, the company will produce 231428 tons of barium carbonate, 4116 tons of high-purity barium carbonate, 3369 tons of high-purity barium chloride and 50823 tons of barium sulfate; The production capacity of strontium carbonate is 30000 tons, accounting for 30% of the market, and the output will be 23765 tons in 2020.
The company is mainly engaged in two series of products: inorganic salts and manganese products. Separately, the output of inorganic salt increased steadily, mainly benefiting from the growth of demand, the rise of price and the increase of gross profit margin, which boosted the performance; The increment of manganese series products mainly comes from the simultaneous rise of quantity and price of high-purity manganese sulfate. We can see that the company’s profit in the third quarter has achieved rapid growth, and the single quarter performance has reached a record high. Considering that the company stripped Rongguang mining and sold the equity of Qingdao Hongxing logistics, so as to reduce the drag of non main business, the company will focus more on the main business in the future, and it is predicted that the company will enter the fast lane of performance growth.
For the first coverage, a “buy” rating is given, and the target price is 33.9 yuan. In general, we estimate that the company’s operating revenue from 2021 to 2023 will be RMB 1.71/2.11/2.38 billion respectively, and the net profit attributable to the parent company will be RMB 219/3.34/418 million respectively, with a year-on-year growth rate of 297% / 52% / 25% respectively, and the corresponding EPS will be RMB 0.74/1.13/1.41 respectively, The PE corresponding to the current share price (closing price on December 11, 2021) is 27 / 18 / 14 times respectively. Taking into account, the company is a scarce leader in the subdivision of new energy battery materials with high growth rate. It is given a price earnings ratio of 30 times in 2022, and the corresponding share price is 33.9 yuan, which still has 67% space compared with the current share price (closing price on December 11, 2021, 20.24 yuan).
Risk tips: (1) the company’s capacity release is lower than expected; (2) the epidemic situation exceeds expectations and affects demand; (3) the risk of core technology leakage; (4) the risk of industrial policy change.
