\u3000\u3 Shengda Resources Co.Ltd(000603) 260 Hoshine Silicon Industry Co.Ltd(603260) )
Key points
Reasonably arrange the production capacity and industrial chain, and firmly occupy the leading position in the industry: Hoshine Silicon Industry Co.Ltd(603260) is a leading enterprise in China’s industrial silicon industry and silicone industry. Its main products include industrial silicon and silicone products. By the end of 2021, the company’s industrial silicon production capacity has reached 730000 tons / year, accounting for 14% of the country’s total production capacity, making it the largest industrial silicon production enterprise in China; The production capacity of silicone monomer reaches 930000 tons / year, accounting for 25% of the total production capacity in China, occupying a leading position. In 2021, benefiting from the strong rebound in downstream demand of the industry and the impact of the dual control policy of industrial energy consumption, the company’s main products, silicon and silicone industry, ushered in a strong boom cycle. The company achieved prosperous production and sales and significantly improved its performance during the year.
Industrial silicon: the supply side structure is improved and the demand side is expanding rapidly: from the supply side, China is the largest producer of industrial silicon in the world. Due to high energy consumption and serious pollution, the development of industrial silicon industry is constrained by the dual control of energy consumption and environmental protection production restriction policy. We believe that under the influence of the policy, the growth space of total industrial silicon production capacity is limited, and the relatively backward small and medium-sized production capacity will accelerate the exit, making room for the capacity construction of large industrial silicon enterprises, and the industry will be further concentrated. From the demand side, the main demand fields of industrial silicon are silicone, polysilicon and aluminum alloy. Among them, silicone and polysilicon play an obvious supporting role in the incremental demand of industrial silicon. We expect that they will bring the demand of 1.06 million tons / 1.19 million tons of industrial silicon respectively in 2025. Hesheng’s industrial silicon production capacity is concentrated in Xinjiang and Yunnan, with significant advantages in self generation cost, and it is planned to increase production by 800000 tons / year in 2022. In the future, the company will continue to maintain its leading position and is expected to fully benefit from the development of industrial silicon industry.
Organosilicon: rapid expansion of production capacity and gradual opening of demand space: from the supply side, China is the main producer of organosilicon. In 2022, China’s organosilicon will enter a rapid expansion cycle. It is expected that 2.05 million tons of monomer production capacity will be released, and the total production capacity will exceed 5.5 million tons, with a year-on-year increase of nearly 50%. From the demand side, silicone has a wide range of applications, and its per capita consumption is positively correlated with per capita GDP. As an emerging market, China has great consumption potential. We expect that the demand for silicone will reach 1.59 million tons by 2025. Hesheng is a leader in the field of industrial silicon. Its industrial silicon business provides sufficient raw material guarantee for the silicone business and has the advantage of business synergy. Under the background of centralized production expansion of various enterprises, the company has maintained a rapid pace of production expansion. It is expected that 800000 T / a silicone monomer capacity will be put into operation in 2022, and the leading position of the industry will be further consolidated.
Profit forecast, valuation and rating: the company is a double leading enterprise in China’s industrial silicon and silicone industries, with significant integrated cost advantages. With a stable capacity expansion plan, the company is expected to continue to expand its market share and further highlight its competitive advantage. In addition, with the increasing demand in downstream photovoltaic, new materials and other fields, the industrial silicon and silicone industry is expected to maintain a high outlook and help accelerate the company’s performance. We maintain the company’s profit forecast from 2021 to 2023. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be RMB 86.61/103.89/11.873 billion respectively, the corresponding EPS will be RMB 8.06/9.67/11.05/share respectively, and the current share price will be 13 / 11 / 9 times of PE respectively. We still maintain the “overweight” rating of the company.
Risk analysis: macroeconomic fluctuation risk, production capacity construction is less than expected, and product price fluctuation risk
