Sunstone Development Co.Ltd(603612) (603612)
High growth: bind customer capacity to double again in 4 years. As a leader in the commercial prebaked anode industry, the company has a prebaked anode production capacity of 2.52 million tons / year (equity production capacity of 1.87 million tons / year). The company cooperates with downstream customers to expand production capacity, which has strong certainty in capacity improvement and digestion. The company plans to increase the production capacity by 600000 tons per year during the 14th Five Year Plan period, reaching 5 million tons / year in 2025 (equity production capacity of more than 3.53 million tons / year), and the total production capacity is nearly doubled in four years.
High incentive: in addition to the actual controllers, 11 directors and supervisors hold a high stock market value of 81.5 million yuan (December 16). As of 2021q3, the actual controllers Lang Guanghui and persons acting in concert hold 36.38% of the company’s shares. In addition to the actual controllers, 11 directors and supervisors hold a total of 0.74% and a stock market value of 81.5 million yuan (closing price on December 16).
Low cost: the cost is lower than the industry average of 400 yuan / ton, with obvious capital and financing advantages. From 2018 to 2020, the company’s gross profit per ton of prebaked anode was 631 yuan / ton, 408 yuan / ton and 450 yuan / ton respectively, far higher than the industry average level (the industry can only maintain profit and loss balance in the same period). The company is the largest purchaser of Petrochina Company Limited(601857) coke, with obvious procurement advantages; the company is the only listed company in the prebaked anode industry, with outstanding advantages in capital scale and financing cost.
Low carbon emission: reduce the carbon emission of aluminum electrolysis by 20%. The company’s prebaked anode products have long service life and low unit consumption, which can reduce the power consumption caused by heat loss of electrode exchange; At the same time, the slag dropping rate is low, which can reduce the resistance and slotting heat loss. The unit consumption of the product is 20kg / t lower than the industry average. Considering the pre baked anode production and electrolytic aluminum production links, the company’s pre baked anode products can reduce the carbon emission by 342-359kg / tal, accounting for about 20% of the carbon emission in the electrolytic link.
New layout: expand the comprehensive solution of electrolytic cell. With the rising power cost of the aluminum industry and the stricter emission requirements of the double carbon policy for high energy consuming enterprises, the power of power saving and emission reduction of aluminum enterprises has been significantly enhanced. The company is looking forward to the layout of the comprehensive power-saving scheme of the electrolytic cell, and will solve the power consumption problem of the electrolytic cell from multiple angles such as guide rod, cathode and steel claw in the future, which is expected to become a new highlight of the company’s business.
Industry: there is a tight balance between supply and demand, there is a gap in some parts, and there is still room for high-end anodes. Due to environmental protection and limited production, the operating rate of prebaked anode industry has been low for a long time (the average operating rate is 70%). From January to October 2021, China’s prebaked anode output was 17.53 million tons, prebaked anode consumption was 13.59 million tons, and exports were 1.44 million tons in the same period. The overall balance is tight. Later, with the production of electrolytic aluminum in Southwest China, the gap of prebaked anode in southwest and South China will continue to expand. Due to the need to replace supporting electrolytic cells and improve voltage strength, inert anode does not have large capacity for the time being Under the conditions of scale promotion, there is still room for growth of high-end prebaked anodes.
Profit forecast, valuation and rating: the company’s pre baked anode capacity has expanded steadily. Relying on the advantages of high-quality products and low cost, the profit is expected to break away from cyclical fluctuations and achieve stable growth. Excluding the contribution of new business performance, it is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 650 / 82 / 1.02 billion respectively, with a year-on-year increase of 202% / 27% / 24%, and the corresponding PE of the current stock price is 15 / 12 / 9x respectively. Considering that the company’s performance is expected to grow steadily, it will be covered for the first time and rated as “overweight”.
Risk warning: the capacity investment and construction is not as expected; Risk of sharp fluctuations in raw material prices; Risk of inert anode substitution.
