Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) (000893)
The global potash industry ushered in a boom and prices continued to rise. Since this year, the international price of potassium chloride has continued to rise, especially reaching a new high in recent half a year. As of December 24, 2021, the FOB spot price in Vancouver was reported at US $627 / ton, up 206% year-on-year and 99% in the past half year. The price rise of potash fertilizer is mainly caused by the mismatch between supply and demand in the global market. On the demand side, Shenzhen Agricultural Products Group Co.Ltd(000061) prices rose and the enthusiasm for agricultural planting increased. In terms of supply, the international potash giant’s new production capacity is limited. In addition, the overseas epidemic situation is repeated, resulting in the shortage of shipping capacity. Belarus was sanctioned by the United States, which further increased the market’s concern about the shortage of potash fertilizer supply. Based on the above factors, it is expected that the global potash fertilizer market price may remain high in 2022, and the industry boom remains unchanged.
Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) focus on the potash business, and the production capacity will usher in leapfrog growth. In terms of business, the company is based in Asia, and its business is mainly potassium mining, potassium fertilizer production and sales. The company’s potash fertilizer is mainly engaged in overseas business, and its products are mainly sold to the Southeast Asian market. In terms of capacity layout, the company’s current capacity is 250000 tons. The 750000 ton expansion project will be officially launched in 2020 and officially put into operation at the end of 2021. It is estimated that 1 million tons of potassium chloride can be produced in 2022.
Under the background of rising volume and price, the company may create greater profits. On the one hand, due to the rapid growth of the company’s output, on the other hand, the global potash market was highly prosperous in the second half of 2021, and the product price rose sharply. In this context, the company’s performance improved rapidly. In the first three quarters of 2021, the company achieved a total revenue of 429 million yuan, a year-on-year increase of 53.1%; The operating profit was 152 million, a year-on-year increase of 391%.
Resource advantages provide a solid foundation for the long-term development of the company. First of all, the company is the leader of China’s potash fertilizer enterprises going to sea. It has 35 square kilometers of potash deposits in Laos. The total reserves of potash mines are 1.002 billion tons, converted into 152 million tons of pure potassium chloride. Another 677 million tons of potassium chloride resources are under acquisition. Secondly, Laos is rich in potassium mineral resources, with low mining cost and convenient transportation location. Relying on its resource advantages, the company plans to build a production capacity of 3 million tons in the next 3-5 years, lay a solid foundation for long-term development and make steady progress towards the development goal of an international potash fertilizer supplier.
Investment advice
The international price of potassium chloride continues to rise, and the company’s performance is expected to continue to grow. In 2021, 2022 and 2023, the company’s operating revenue is expected to be RMB 613, 3254 and 3637 million respectively, and the net profit attributable to the parent company is expected to be RMB 807, 1140 and 1305 million respectively (including non recurring profit and loss of RMB 628 million in 2021). In combination with the upward trend of the industry and the significant increase of the company’s output, the company is optimistic about the development of the company. It is rated as “strongly recommended” for the first coverage.
Risk statement
Repeated overseas epidemics, uncertainty of asset restructuring, fluctuation of potash price and change of exchange rate.
