\u3000\u3 China Vanke Co.Ltd(000002) 545 Qingdao East Steel Tower Stock Co.Ltd(002545) )
Event overview. The company announced 2021 performance express and 2022q1 performance forecast. In 2021, the company expects to achieve revenue of 2.78 billion yuan, a year-on-year increase of + 4.92%, and net profit attributable to the parent company of 404 million yuan, a year-on-year increase of + 30.77%; The corresponding Q4 revenue was 760 million yuan, a year-on-year increase of + 5.7%, and the net profit attributable to the parent company was 52 million yuan, a year-on-year increase of – 32.3%. The company expects to realize a net profit attributable to the parent company of RMB 185225 million in Q1, a year-on-year increase of + 292.36-377.19%.
Q1 performance is slightly lower than the market expectation. In 2022q1, the company’s median performance attributable to the parent company was 205 million yuan, an increase of 335% at the same time. The performance ushered in a significant release, slightly exceeding market expectations, and 22q1 was the best performance in the first quarter since the company was listed. The main reason is that the global price of potassium chloride products increased significantly year-on-year. The first quarter of the company’s traditional tower business is a traditional off-season, so it is judged that most of the profits are brought by the potash business. According to the reasonable calculation of the company’s 500000 ton capacity, the output of 22q1 is about 120000 tons, and the apparent net profit per ton is 1700 yuan / ton (deducting the non ton net profit of 1645 yuan), which is based on the dynamic increase of about 150% year-on-year in the price of potassium chloride in China and Southeast Asia (Note: the year-on-year range is different at different time points). The performance elasticity of the company’s potassium fertilizer is very significant. The decline in performance of 21q4 was mainly affected by covid-19 epidemic, and there was a shutdown in the mining area, which failed to release part of the profits of Q3 and Q4 last year.
There will be a hard gap in global potash supply in 2022. Since 2021h2, due to the shrinking trend of international supply, the price of potash fertilizer has entered the upward channel. In 2022q1, Lithuania announced sanctions against Belarus to prohibit its export from kleipeda port of Lithuania, resulting in a large gap and fragmentation in the international potash fertilizer supply. According to the data of IFA and nutrien announcement, about 20% of the hard supply gap appears. If Russia’s export restrictions are added, the highest 40% of the world’s supply is blocked. According to wind data, the ex factory price of potassium chloride in Qinghai Salt Lake in China has increased from about 2000 yuan / ton in early 2021 to 3900 yuan / ton, while the international price has increased even more.
From the perspective of anti globalization, it is expected that the rise in global potassium fertilizer prices will last for a long time. According to the data disclosed in the annual reports of IFA, nutrien, mosaic and other companies, Belarus exports about 10-12 million tons of potash fertilizer every year, accounting for 20% of the global trade volume, weakening the global supply significantly. IFA predicts that the global nominal capacity will increase by about 1.6% this year, which can not make up for the current gap. If Lithuania and the United States do not lift the sanctions against Belarus, Belarus needs to negotiate with other countries to build railway ports in the territory for transportation, which will take more than one year according to the infrastructure progress. Therefore, we believe that this round of potassium fertilizer price rise is highly sustainable. In addition, the conflict between Russia and Ukraine and the supply disturbance between Canada and China may further weaken the fragile supply.
The certainty of the company is enhanced, and the expansion of production is at the right time to embrace the high profit cycle. According to the company’s project progress announcement in January, we expect that the company will add 500000 tons of production capacity in the fourth quarter. At that time, the company’s nominal production capacity will double to 1 million tons, and the output will double in 2023, with lower cost and stronger profitability. According to the announcement plan, it is expected to achieve 2 million tons of nominal production capacity in 2025. As mentioned above, we judge that the upward cycle of potash fertilizer price may last for a long time. Therefore, we believe that the company’s profit in 2023 will also show a high growth trend. At present, it is only the early stage of the company’s high profit cycle, and the company’s performance announcement is expected to strengthen the market’s recognition of the company’s operational certainty. In addition, we expect that after the epidemic, the investment in power infrastructure will accelerate, the company’s power grid steel structure business will also benefit, and the dual main industries of potash fertilizer and steel structure are expected to resonate. At present, if the market value of comparable companies is still significantly underestimated, we are optimistic about the further repair of the company’s valuation in the future.
Investment advice
Considering that the price of potash fertilizer increases greatly after the first coverage and we think it is highly sustainable, we raise the price assumption of potash fertilizer. The revenue forecast for 20222023 was raised to 4.126/5.799 billion yuan (Original: 3.973/4.953 billion yuan), and the EPS forecast for 20222023 was raised to 0.79/1.26 yuan (Original: 0.60/0.74 yuan). The profit forecast for 20222023 corresponds to the closing price of 14.39 yuan on April 14, about 18.14/11.40xpe. Maintain the company’s 22x2022epe valuation unchanged, raise the target price to 17.38 yuan (Original: 13.20 yuan), and maintain the “buy” rating.
Risk tips
The demand is lower than expected, the cost is higher than expected, the production is slower than expected, and there are systemic risks.
