Snowsky Salt Industry Group Co.Ltd(600929) (600929)
Event: issuance of shares to purchase assets and completion of transfer of underlying assets of related party transactions. On December 17, Snowsky Salt Industry Group Co.Ltd(600929) announced that it planned to issue shares to acquire 100% equity of Xiangyu Yanhua, and the plan has been reviewed and approved by the CSRC. In this transaction, the company issued a total of 416 million shares, and the stock issuance price was determined to be 4.63 yuan / share. It issued shares to the counterparty light salt group, light salt Shengfu fund and Valin Jinshan to purchase 100% equity of Xiangyu Yanhua, and the transaction consideration of target assets was 1.927 billion yuan. The Xiangyu salt chemical company to be acquired by the company has an annual production capacity of 1 million tons of well mineral salt, 700000 tons of soda ash and 700000 tons of ammonium chloride. At the same time, the company is making capacity technical transformation and construction, and is expected to further improve the company’s soda ash capacity in the future. On December 28, the company announced that 100% equity of Chongqing Xiangyu Yanhua has completed the transfer procedures and the corresponding industrial and commercial change registration.
The high prosperity of soda ash industry thickened the company’s performance, providing strong support for the expansion of other businesses. 2021 is the year when the business cycle of soda ash industry starts. Referring to the profitability of other companies in the same industry, it is expected that Hunan Chongqing salt industry can contribute 300-400 million net profit to the company in the whole year, becoming an important source of performance growth of the company. We expect that under the influence of carbon neutralization policy, the demand of soda ash industry is expected to maintain marginal growth, and the new capacity on the supply side will be released until 2023. The prosperity of soda ash industry will maintain a high level in the next two years. Through the acquisition of Xiangyu salt industry, the company can enjoy the rich profits and abundant cash flow brought by the prosperity of soda ash industry in the future, so as to provide a strong financial guarantee for the expansion of other businesses of the company.
The strategy of high-end edible salt has been steadily promoted, and the salt business is expected to release performance flexibility in the future. In April this year, the company launched the loose 997 series of high-end small packaged salt products. The loose 997 uses natural drinking water source to collect brine, uses ceramic membrane nanotechnology to filter impurities, and does not add anti caking agent, flocculant and scale inhibitor in the whole process. The purity of the product reaches 99.7%, setting a quality benchmark in the edible salt industry. At present, loose 997 has a good dynamic sales situation in the provincial market with prominent brand and channel advantages, and has gradually completed the distribution in other markets outside the province. At present, the product sales volume is more than 4000 tons, and the planned production capacity has not been fully utilized. Under the wave of consumption upgrading, consumers pursue the improvement of salt quality, but are relatively insensitive to the price of edible salt with low unit price and small consumption amount, which has laid a market foundation for the promotion of the company’s high-end strategy. The company is ahead of the industry in brand publicity and consumer education, and the brand popularity and influence of Xuetian salt are gradually improved. With the continuous deepening of the market in the province and the further opening of the market outside the province, it is expected that there will be a large room for improvement in the sales of high-end products in the future. The ex factory price of high-end products is more than double that of conventional salt products. In the future, the volume of high-end products will significantly increase the ton price of small packaged salt and contribute to the performance elasticity. In terms of salt in the food industry, the company continued to strengthen cooperation with downstream food production enterprises and recently signed a strategic cooperation framework agreement with the head condiment enterprise Jiajia Food Group Co.Ltd(002650) , which is conducive to the improvement of the company’s salt sales and the complementarity of the channel network advantages of both sides. In addition, the recent ice and snow weather in southern China has promoted the sales volume of snow melting salt of the company to increase by more than 8000 tons.
Salt cave resources have broad development space. The comprehensive utilization and development of salt caverns is a development direction supported by the state and focused by the industry. At present, China Salt Group has done relevant experimental projects in the industry and has successfully operated this year. The company also has good resources. It has four well mineral salt enterprises with large scale and long mining time. Therefore, it has rich salt cave resources. For example, Xiangheng salt chemical, a subsidiary of the company, was built in 1969. At present, its annual production capacity has reached more than 2.6 million tons, and its annual new salt cave space is still increasing. Hengyang salt cave comprehensive utilization and development has also been included in the key planning project of the 14th five year plan of Hunan Province, and the government supports and promotes the project.
Profit forecast and investment suggestions: considering the impact of asset acquisition on the company’s performance, we adjust the company’s profit forecast. It is estimated that the operating revenue of the company from 2021 to 2023 will be RMB 4.76/5.24/6.02 billion respectively, and the attributable net profit will be RMB 480/5.6/5.7 billion respectively, The corresponding EPS is 0.36/0.42/0.43 yuan respectively (after share dilution). The company is a leading enterprise in the industry in the transformation of medium and high-end edible salt. The sunk cost in the early stage has affected the current performance level. In the future, the development of medium and high-end edible salt market will provide the company with high profit elasticity. It is estimated that the salt business will contribute about 160 million profit in 22 years, 34-38 times PE in 22 years, and the chemical business will contribute about 4% profit in 22 years In consideration of the strong profitability and anti risk ability of the company’s chemical business, 10-12 times PE will be given to the chemical business for 22 years, and the target market value range of 9.4-10.9 billion (including newly issued shares) will be given to the two parts of business, with the corresponding reasonable range of stock price of 7.0-8.1 yuan / share, maintaining the rating of “prudent recommendation”.
Risk tip: the boom of chlor alkali industry is at a downward risk; The promotion of medium and high-end edible salt products is less than expected; Channel construction was less than expected.
