Sanxiang Advanced Materials Co.Ltd(603663) (603663)
Old brand company focusing on expanding zirconium products: Sanxiang Advanced Materials Co.Ltd(603663) is an enterprise focusing on the R & D, production and sales of zirconium products, cast new materials, and new industrial new materials such as magnesium aluminum alloy. The company was formally established in 1991; In 2018, the company entered the field of sponge zirconium through the acquisition of Liaoning huazirconium; In 2020, it will enter the field of chemical zirconium by holding Liaoning Huaxiang. In the first half of 2021, the operating revenue increased by 26.37% year-on-year and the gross profit margin was 27.91%.
Zirconium industry: high dependence on imports, uneven supply and demand, and rising prices. According to the statistics of USGS, the global zirconium ore reserves will be about 64 million tons in 2020, It is mainly distributed in Australia (67.2%) and South Africa (10.5%), China’s reserves account for only 0.79%; China’s output is only 140000 tons, accounting for about 10% of the total supply. According to USGS, China’s demand for zirconium ore in 2020 is about 1.21 million tons, while China’s output is only 140000 tons, and the demand gap is as high as 1065000 tons. After RBM announced its shutdown in June 2021, the price of zircon sand rose sharply, with an increase of about 40% from June to October 2021. Among zirconium products, sponge zirconium Zirconia prices rose to varying degrees.
Multi point business blossoms, focusing on high-end new zirconium products. As of June 30, 2021, the annual production capacity of fused zirconia is 26000 tons, which is in a leading position in China. In the first half of 2021, the planned annual capacity of industrial grade zirconium sponge phase I is 3000 tons, which has been gradually put into operation; The 1000 ton project of nano zirconia phase I has been put into operation in January 2021; The 20000 ton zirconium oxychloride phase I project is in the stage of comprehensive equipment commissioning, and can be put into operation as planned after commissioning. The company has formed a good cooperative relationship in zirconium products and formed two industrial chains centered on electrofusion zirconia and chemical zirconium; The self supply of electricity and the reduction of unit consumption make Sanxiang Advanced Materials Co.Ltd(603663) have a cost advantage over the industry; After more than 30 years of deep cultivation, the company’s technical R & D strength has been continuously enhanced.
Join hands with Contemporary Amperex Technology Co.Limited(300750) to lead the lightweight wave of magnesium aluminum alloy. In August 2020, Sanxiang Advanced Materials Co.Ltd(603663) plans to jointly invest in the magnesium aluminum alloy project with Contemporary Amperex Technology Co.Limited(300750) , Wanshun group, Junda investment and Yintai investment, with a planned capacity of 50000 tons and a total investment of 800 million yuan. In the early stage, we will lay out the field of magnesium alloy building formwork and promote the shell of magnesium alloy power battery pack, which is expected to be put into trial operation by the end of 2021. Magnesium for building formwork and power battery pack shell has broad prospects. Aluminum alloy is the current mainstream material, and the density of magnesium alloy is much lower than that of aluminum alloy. Magnesium aluminum alloy is a high-quality new material to help reduce the weight of automobile; And make up for its lack of alkali corrosion resistance, and gradually replace aluminum alloy, which has a broad prospect in the field of building formwork.
Profit forecast and investment rating: we expect that from 2021 to 2023, the company’s revenue will be RMB 1.00/14.50/1.9 billion respectively, with a growth rate of 36.4% / 45.0% / 31.0% respectively. We estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 93 / 183 / 264 million respectively, and the corresponding growth rate will be 43.7% / 96.8% / 44.0% respectively; The corresponding PE is 49x / 25X / 17x respectively, and the valuation is lower than that of comparable companies. Considering the demand growth of the company’s new material industry, the volume and price of the company’s zirconium products rise together. The magnesium aluminum alloy project jointly invested with Contemporary Amperex Technology Co.Limited(300750) is expected to be completed and put into operation by the end of the year, and the profit is expected to increase. Therefore, it is covered for the first time and given a “buy” rating.
Risk warning: the construction of new projects does not meet expectations; Repeated epidemic situation; Price fluctuations exceeded expectations.
