Snowsky Salt Industry Group Co.Ltd(600929) (600929)
Event: the company issued an announcement. On December 17, the issue of shares issued by the company to acquire the assets of Hunan Chongqing Salt Chemical Co., Ltd. was approved by the CSRC. The acquisition company issued a total of 416 million shares, which were issued to the controlling shareholders of the company, light salt group, light salt Shengfu fund and Valin Jinshan. It purchased 100% equity of Xiangyu Yanhua at a price of 4.71 yuan / share, with a total transaction consideration of 1.928 billion yuan.
The merger of Xiangyu Salt Chemical Co., Ltd. has greatly increased the company’s profits and built a core advantage in soda ash production capacity. Snowsky Salt Industry Group Co.Ltd(600929) Xiangyu salt chemical, the company to be acquired, has a soda ash production capacity of 700000 tons / year. The production expansion and technical correction are gradually promoted as planned. The soda ash production capacity is expected to be further expanded and the production cost will be further reduced. Soda ash products enter the business cycle in 2021, and the opening of this business cycle is driven by the large increase in demand of downstream photovoltaic industry. In short supply, the soda ash industry entered a period of rapid price increase. The price continued to rise from March to June, and the price increase was high in the second half of the year. At the beginning of the year, the price of light soda ash was 1418 yuan / ton. As of September 30, the price was 3214 yuan / ton, with a growth rate of 126.66%; At the beginning of the 21st century, the price of heavy soda ash was 1471 yuan / ton. As of September 30, the price was 3300 yuan / ton, with a growth rate of 124.34%. Under the national goal of reaching the carbon peak by 2030, the continuous increase of photovoltaic installed capacity will promote the continuous boom of soda ash price. At the same time, under the dual control policy, the supply of soda ash industry is tightened, and some soda ash enterprises are under started or shut down. In the future, the growth of soda ash production capacity will be limited, which will continue to benefit the price of soda ash. After the merger of Hunan Chongqing salinization, it is expected to significantly increase the company’s profit level and improve the company’s profitability. The company takes salt as the axis and is driven by edible salt + salt chemical industry.
The edible salt business is high-end + national, with large room for volume and price growth. From the perspective of price, the company led the industry to open the road of high-end upgrading of salt. In April 21, the company launched the high-end sub brand Songtai 997 series, which helped improve the brand effect by means of advertising, variety sponsorship and star endorsement, and expanded the space for product price increase. From a regional perspective, the company’s influence in Hunan Province has been continuously strengthened, and the channels in Hunan Province have been continuously refined; With the reform of salt industry system and the liberalization of cross regional operation of edible salt, the company has rhythmically opened markets outside the province, with strong expansion momentum, and the trend of national expansion of the company is obvious.
The downstream industrial chain of salt chemical industry is long, and the company’s business extends downstream, resulting in higher profit margin. The company actively extends to downstream products such as soda ash, caustic soda and hydrogen peroxide, providing more possibilities for exploring applications in the field of salt chemical industry. At present, under the dual control and carbon neutralization policies, soda ash production and capacity expansion are limited, downstream new energy is booming, there is a demand gap, supply and demand cannot match in the short term, and soda ash prices may remain high. In addition, the company actively expands new businesses such as salt drug integration and salt cave energy storage to create a new growth point.
Profit forecast: as the rising coal price increases the cost pressure, the profit forecast is adjusted. It is predicted that the net profit from 2021 to 2023 will be adjusted from 183 / 226 / 273 million yuan to 154 / 178 / 209 million yuan, with a year-on-year growth rate of 5.96% / 15.66% / 17.14%, and EPS of 0.17/0.19/0.22 yuan / share. Due to the limited capacity of soda ash and the strong demand for new energy in the downstream, the price of soda ash rises. It is predicted that the net profit of Hunan Chongqing salinization will be adjusted from 245 / 279 / 312 million yuan to 341 / 410 / 455 million yuan from 2021 to 2023, maintaining the “buy” rating.
Risk tips: macroeconomic cycle, changes in main energy prices, business expansion less than expected, integration risk after the completion of the transaction, failure to realize the performance commitment, incomplete amount of performance compensation, possible relocation of rock salt mining areas under the target company, and risks related to the construction and operation of technical transformation projects of the target company
