\u3000\u3000 Hubei Xingfa Chemicals Group Co.Ltd(600141) (600141)
Event: on January 7, the company issued an announcement on the pre increase of performance in 2021. It is expected that the company will realize a net profit attributable to the parent company of 4.2-4.4 billion yuan in 2021, a year-on-year increase of 573.14% – 605.19%. Among them, Q4 in 2021 is expected to realize a net profit attributable to the parent company of RMB 1.712-1.912 billion, with a year-on-year increase of 553.44% – 629.77% and a month-on-month increase of 27.10% – 41.95%.
The price of main products rose sharply, and the profitability of the company increased greatly. In 2021, the chemical industry ushered in a boom cycle. The sales prices of the company’s main products such as silicone, glyphosate and yellow phosphorus increased significantly year-on-year, and the profitability was significantly enhanced. According to Ifind data, in 2021, the average market prices of organosilicon, glyphosate and yellow phosphorus increased by 69.47%, 102.90% and 81.13% respectively year-on-year. Among them, the market prices of Q4 in 2021 increased by 65.70%, 181.48% and 179.52% year-on-year, 13.71%, 38.07% and 41.81% respectively month on month. In addition, the company’s industrial chain advantages of “integration of mining, electrification, phosphorus and silicon salt” and “combination of mining and fertilizer” also enable the company to effectively control production costs and further improve the company’s profitability. In 2021, the company’s 3 million T / a low-grade collophanite beneficiation and deep processing project and 400000 T / a synthetic ammonia project were successively put into operation, which improved the company’s raw material self-sufficiency rate. In 2022, the company plans to build a 400000 T / a silicone production capacity in Inner Mongolia. It is expected to reach the production capacity by the end of 2023. After reaching the production capacity, the company will further expand and strengthen the main business of phosphorus and silicon, and further consolidate its leading position in the industry. In addition, the company is also planning to build a new capacity of dimethyl sulfoxide, and plans to increase the capacity from 40000 t / A to 60000 T / A, which is expected to be put on the market in June 2022.
Expand the production capacity layout of electronic chemicals and introduce the strategic investment of “big fund phase II”. At present, Xingfu electronics, a subsidiary of the company, has a comprehensive recycling capacity of 30000 T / a electronic grade phosphoric acid, 20000 t / a electronic grade sulfuric acid, 30000 T / a electronic grade etching solution and 5000 t / a electronic grade phosphoric acid. At the same time, it is building a capacity of 40000 t / a electronic grade sulfuric acid, 20000 t / a electronic grade hydrogen peroxide, 20000 t / a electronic grade etching solution and so on. The company’s capacity scale of wet electronic chemicals ranks in the forefront of the industry, and the overall product quality is at the international advanced level. Customers have supplied them in batches to Semiconductor Manufacturing International Corporation(688981) , Huahong group, Changjiang storage and other well-known semiconductor wafer foundries in China. Thanks to the rapid development of the Chinese mainland’s semiconductor industry and the rapid expansion of the capacity of the mainland’s wafer foundries, the company’s future capacity of the new wet electronic chemicals is expected to be completely digested. In December 2021, the company announced that its subsidiary Xingfu electronics planned to introduce 15 strategic investors with “big fund phase II” as the lead investor in the form of non-public agreement. The 15 strategic investors will increase the total capital of Xingfu electronics by 768 million yuan (including 240 million yuan for “big fund phase II”). After the capital increase, the above strategic investors will hold 30.77% equity of Xingfu Electronics (including 9.62% equity of “big fund phase II”). The introduction of strategic investors will provide sufficient funds for the rapid development of the company.
Join hands with Zhejiang Huayou Cobalt Co.Ltd(603799) to enter the new energy materials industry and realize industrial transformation and upgrading. In November 2021, the company announced that it had signed a cooperation framework agreement with Zhejiang Huayou Cobalt Co.Ltd(603799) . The two sides jointly planned to build 500000 T / a iron phosphate, 500000 T / a lithium iron phosphate and related supporting projects in Yichang, Hubei Province. In terms of phosphorus source, as of the first half of 2021, the company has 429 million tons of phosphate rock resource reserves with mining rights and 378 million tons of phosphate rock resource reserves under control (converted according to equity). The existing phosphate rock production capacity is 4.15 million tons / year, and the Houping phosphate rock mining and dressing project under construction is expected to be completed in the second half of 2022. In addition, Yidu Xingfa, a wholly-owned subsidiary of the company, has a refined and purified phosphoric acid production capacity of 100000 tons / year, and the supporting capacity of liquid ammonia and hydrogen peroxide is also abundant, so it has a strong synergistic effect on the production of iron phosphate. In terms of lithium source, the partner Zhejiang Huayou Cobalt Co.Ltd(603799) owns the equity of relevant lithium resource projects in Argentina and the Democratic Republic of the Congo respectively. The cooperation between the company and Zhejiang Huayou Cobalt Co.Ltd(603799) is expected to achieve win-win results, jointly enter the new energy material industry and realize industrial transformation and upgrading.
Profit forecast, valuation and rating: Based on the sharp rise in the price of main products, the company’s performance exceeded expectations. We believe that the prices of relevant products are expected to remain at a medium high level in the future. At the same time, with the expansion of relevant production capacity, we raised the company’s profit forecast. It is estimated that the net profit attributable to the parent company from 2021 to 2023 will be 42.44 (up 28.1%) / 46.46 (up 21.2%) / 51.13 (up 12.6%) billion yuan respectively. We continue to be optimistic about Hubei Xingfa Chemicals Group Co.Ltd(600141) under the industrial chain advantages of sufficient high-quality phosphate rock resources, phosphate rock electricity integration and phosphorus silicon salt coordination, the continuous expansion of production capacity and the positive promotion to the market of electronic chemicals and new energy materials maintain the “buy” rating of the company.
Risk tip: production capacity construction is less than expected, product price fluctuation risk, and landing risk of cooperative projects
