Sunstone Development Co.Ltd(603612) (603612)
Capacity expansion is superimposed on the recovery of industry prosperity, and the company’s performance is expected to usher in a centralized release
As a leading enterprise of prebaked anode in China, the company has continuously accelerated the pace of capacity expansion in recent years by relying on cost advantages and through the mode of joint venture. With the successive implementation of projects under construction, the production and sales volume of the company will increase steadily. On the other hand, benefiting from the steady growth of downstream electrolytic aluminum demand, the prosperity of prebaked anode industry is gradually recovering, and the product profit center is expected to rise further. After performance measurement, we estimate that the net profit attributable to the parent company from 2021 to 2023 will be RMB 631 million, RMB 911 million and RMB 1124 million respectively, and the EPS will be RMB 137 million, RMB 198 million and RMB 244 million respectively. The current share price corresponds to 15.4, 10.6 and 8.6 times of PE from 2021 to 2023 respectively. For the first time, give a “buy” rating.
The prosperity of the industry is gradually recovering, and regional opportunities are highlighted
Demand side: China’s electrolytic aluminum terminal demand is strong. In 2020 and January October 2021, China’s electrolytic aluminum output increased by 4.80% and 5.11% respectively year-on-year. Looking forward to the future, even if the aluminum used in traditional construction real estate is mainly stable, China’s electrolytic aluminum production is expected to continue to maintain a small growth in the future, benefiting from the pull of emerging fields such as new energy vehicles. Supply side: Although China’s prebaked anode capacity is relatively surplus at this stage, the capacity has gradually remained stable since 2018 and there will be less new capacity in the future, and the supply pattern is constantly improving, The operating rate of the industry is also continuously increasing (from about 60% before 2020 to more than 70% at present). At the same time, with the gradual strengthening of the trend of “moving North aluminum to the South”, the capacity gap of prebaked anode in Southwest China may further expand (the current gap is nearly 1.2 million tons), and the regional opportunities of prebaked anode industry are gradually highlighting. On the whole, the prosperity of China’s prebaked anode industry is gradually recovering, and the product profit center can be expected to rise.
Relying on the cost advantage, the company continues to accelerate the pace of capacity expansion
Significant cost advantage is an important guarantee for the continuous growth of the company: (1) the production capacity ranks first in the industry, and the scale advantage is conducive to reducing depreciation and raw material procurement costs; (2) reducing energy consumption costs such as power through comprehensive resource utilization projects and advanced production technology; (3) As the only listed company in the industry, the financing is convenient and the capital cost is low. In recent years, the company is relying on the cost advantage and continuously accelerating the pace of capacity expansion through joint venture plant construction (especially in Southwest China), it is estimated that by 2022 and 2025, the company’s pre baked anode capacity will reach 3.17 million tons / year and 4.97 million tons / year respectively. With the continuous implementation of capacity under construction, the company’s performance is expected to be released.
Risk tip: the price of raw materials fluctuates sharply, and the production capacity launch process is not as expected.
