event
On December 30, 2021, Shanghai Zhongyida Co.Ltd(600610) issued the latest report on issuing shares, purchasing and raising distribution funds and related party transactions (Draft) (Revised), which updated the latest data of Wengfu group, and we analyzed the phosphorus chemical industry accordingly.
Key investment points
The integrated phosphorus chemical industry leader has obvious advantages in cost and technology
Wengfu group has a capacity of 1 million tons of wet process purified phosphoric acid (PPA), with an annual external sales volume of more than 700000 tons except for some self use. In the first three quarters of 2021, the PPA output of Wengfu group reached 793000 tons, and the capacity utilization rate reached 106%. The spot market price of PPA reached a high of 20000 yuan / ton (including tax) in 2021, and the current price is about 10500-11000 yuan / ton (including tax). In 2021, the average sales price of Wengfu group’s PPA in the first three quarters was about 4978 yuan / ton, which was lower than the spot market price. We believe that it was mainly caused by long-term association orders.
The gross profit margin of phosphorus chemical business (mainly from PPA) of Wengfu group in the first three quarters of 2021 is 42.12%. It is roughly estimated that the company’s PPA gross profit is about 2097 yuan / ton. It is estimated that the cost advantage of phosphorus source from phosphate rock integrated phosphorus chemical enterprises is about 2100 yuan / ton. With the rise of phosphate rock and PPA prices, the cost advantage of phosphorus chemical enterprises will become more obvious.
Iron phosphate gives phosphorus chemical enterprises greater profit and growth space
Industrial grade PPA or industrial grade monoammonium phosphate need to be used as phosphorus source for the production of iron phosphate. PPA has high threshold and process, and only a few have completed industrial application.
The gross profit margin of phosphate fertilizer of Wengfu group in the first three quarters of 2021 was 21.64%. The main revenue came from fertilizer grade diammonium phosphate, with an average price of 2860 yuan / ton. It is roughly estimated that the gross profit per ton is 619 yuan / ton. The unit consumption of phosphate rock for producing 1 ton of fertilizer grade ammonium phosphate is about 1.5-2 tons, that is, the gross profit per ton of phosphate ore processed into fertilizer grade diammonium phosphate is about 309-413 yuan / ton. The company’s PPA gross profit is estimated to be 2097 yuan / ton, the unit consumption of 1 ton of PPA phosphorus ore is about 3.7 tons, and the gross profit of processing a single ton of phosphorus ore into PPA is about 567 yuan / ton. In fact, in the first three quarters, the gross profit margin of Wengfu group’s fertilizer business was generally higher than that of other listed companies. At the same time, the selling price of PPA was lower than the market spot price. Considering that there was still gross profit in the processing of iron phosphate, it was expected that the profit of phosphorus chemical enterprises in processing phosphorus ore into iron phosphate would be much higher than that of using phosphorus ore to produce fertilizer.
Massive markets call for large chemical supply chains. Lithium giants embrace phosphorus chemical enterprises. Over the past year, lithium giants have cooperated with phosphorus chemical enterprises, including Contemporary Amperex Technology Co.Limited(300750) with Hubei Yihua Chemical Industry Co.Ltd(000422) , Guizhou phosphating group and Zhejiang Huayou Cobalt Co.Ltd(603799) with Hubei Xingfa Chemicals Group Co.Ltd(600141) . Lithium giants mainly pay attention to the advantages of phosphorus chemical enterprises in resource side and chemical process, and can stably provide huge and stable raw material supply, The strategic position of phosphorus chemical industry in lithium battery industry chain has been improved. For phosphorus chemical enterprises, it is difficult to increase the capacity of ammonium phosphate traditionally required. The production indicators of purified phosphoric acid and industrial monoammonium phosphate can be obtained through capacity replacement, so as to extend the industrial chain to iron phosphate. Phosphorus chemical enterprises have obvious integration advantages in phosphorus source and production and processing supporting facilities. In the long run, the performance and valuation are expected to improve simultaneously.
Industry rating and investment strategy
We are optimistic about enterprises that cooperate closely with lithium giants and have the advantages of phosphorus ore resources and phosphorus chemical process. We recommend Hubei Xingfa Chemicals Group Co.Ltd(600141) , Yunnan Yuntianhua Co.Ltd(600096) , Guizhou Chanhen Chemical Corporation(002895) , Sichuan Development Lomon Co.Ltd(002312) , Hubei Yihua Chemical Industry Co.Ltd(000422) , pay attention to Shanghai Zhongyida Co.Ltd(600610) , Chengdu Wintrue Holding Co.Ltd(002539) , Xinyangfeng Agricultural Technology Co.Ltd(000902) and give the “overweight” rating to the phosphorus chemical industry.
Risk statement
The demand of lithium battery industry is lower than the expected risk; Risk of sharp price reduction in phosphorus chemical industry chain; The development progress of lithium iron phosphate is less than the expected risk; Recommend the risk that the company’s performance does not meet expectations; Market systemic risk.
