Core view
In 2021, the performance of A-share potash fertilizer sector was excellent. Among the enterprises that have published the annual report of 2021, Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) deducted 290 million yuan of non parent net profit, an increase of 62 times year-on-year; Zangge mining deducted non parent net profit of 1.36 billion yuan, a year-on-year increase of 599%. The type of performance forecast of A-share potash fertilizer enterprises in 2021 is pre increase. Among them, Qinghai Salt Lake Industry Co.Ltd(000792) net profit is the largest. In 2021, the company expects the net profit attributable to the parent company to be 3.88-4.28 billion yuan, with a year-on-year increase of 90.2% – 109.9%. Although Qingdao East Steel Tower Stock Co.Ltd(002545) did not release the performance forecast, according to the data of the company’s third quarterly report in 2021, the company achieved a net profit deduction of 326 million yuan in the first three quarters of 2021, with a year-on-year increase of 70.1%.
The improvement of the performance of the potash fertilizer sector is mainly due to the rise in the price of potash fertilizer under the impact of global supply.
In terms of supply, in the second half of 2021, Europe and the United States jointly sanctioned the Belarus potash industry. In February 2022, Belarus potash announced that it was unable to continue to perform the contract due to force majeure. At present, a suitable alternative has not been determined for the export of potash fertilizer from Belarus. About 21% of the global potash fertilizer supply side has been affected by the sanctions against Belarus. In terms of price, the global price of potash fertilizer rose sharply in 2021. By the end of 2021, the FOB prices of potassium chloride in Vancouver, northwest Europe and Israel were reported at US $626.5, US $619.5 and US $652 / ton respectively, with annual increases of US $421.5, US $423 and US $445.5 / ton respectively, with increases of 205.6%, 215.3% and 215.7% respectively. Under the high business cycle of the industry in 2021, the secondary market of potash fertilizer sector is outstanding, and enterprises show high growth. From the stock price performance, the overall performance of the potash fertilizer sector in 2021 is stronger than the market. CITIC potash index rose 302.1% in 2021, far exceeding the increase of 4.8% in Shanghai index and 44.9% in CITIC chemical index. The valuation level of potash fertilizer is high. From May 2020 to March 2022, the valuation of CITIC potash fertilizer sector is in the range of 35.72-109.74 times, which is significantly higher than the average valuation level of CITIC chemical sector of 19.86-45.26 times. The growth of potash fertilizer sector is mainly reflected in two aspects: on the one hand, Chinese potash enterprises ( Qinghai Salt Lake Industry Co.Ltd(000792) , zangge mining) rely on salt lake resources and their own technological advantages to develop salt lake lithium extraction and produce lithium carbonate. The downstream of lithium carbonate is the new energy vehicle industry chain, and the growth of new energy demand gives the sector high growth. On the other hand, overseas potash fertilizer enterprises ( Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , zangge mining) actively expand production, and the increase of production capacity brings growth space for enterprises. Among them, Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) production capacity was expanded from 250000 tons to 1 million tons, with an increase of 4 times Qingdao East Steel Tower Stock Co.Ltd(002545) started the construction of a new production capacity of 1 million tons (500000 tons in phase I).
The global supply gap will further deepen in 2022, and the potash industry is expected to maintain a high boom. Under the conflict between Russia and Ukraine, in March 2022, Russia announced a temporary suspension of fertilizer exports. Superimposed on the obstruction of Belarus’ exports, about 40% of the world’s potash supply has been affected. Under the background of supply obstruction, the international price of potash fertilizer rose rapidly. As of April 1, 2022, the international price of potassium fertilizer has reached a new high. The FOB quotation of potassium chloride in Vancouver and northwest Europe is 852 and 901.5 dollars / ton respectively, up 103.5 and 87.5 dollars / ton respectively compared with March 31, up 13.83% and 10.75% respectively compared with the previous week, and up 36.0% and 45.5% respectively compared with the beginning of the year. In China, the import dependence of potash fertilizer is more than 50%, so the price of potash fertilizer in China is greatly affected by the international market. The CFR price of the large contract in 2022 is set at $590 / ton, which is $343 / ton higher than that in 2021. The high price of the large contract sets the tone for the price of potash fertilizer in China in 2022. In the long run, the supply gap is difficult to make up in a short time. Under the condition of short supply, the global price of potassium fertilizer may continue to rise in 2022.
Investment advice
Under the background of limited potash supply and upward business cycle of the industry, relevant production enterprises may benefit, such as Asia-Potash International Investment (Guangzhou) Co.Ltd(000893) , Qinghai Salt Lake Industry Co.Ltd(000792) , Zangger mining, Qingdao East Steel Tower Stock Co.Ltd(002545) , etc.
Risk tips
Upgrading of safety and environmental protection policies, repeated overseas epidemics, international geopolitical changes, exchange rate changes, etc
