\u3000\u30 Shenzhen Zhenye(Group)Co.Ltd(000006) 83 Inner Mongoliayuan Xing Energy Company Limited(000683) )
Event:
On April 22, 2022, the company released the first quarterly report of 2022: in Q1, 2022, the company realized an operating revenue of 2.681 billion yuan, a year-on-year increase of + 19.81% and a month on month decrease of – 3.09%; The net profit attributable to the parent company was 792 million yuan, a year-on-year increase of + 137.79% and a month on month increase of – 72.42%; The net profit attributable to the parent company after deducting non profits was 790 million, with a year-on-year increase of + 138% and a month on month increase of + 7%. The weighted average roe was 5.03%, up 1.83 PCT year-on-year. The gross profit margin of sales was 38.42%, up 1.22 PCT year-on-year and 3.88 PCT month on month; The net profit margin on sales was 34.61%, up 15.35 PCT year-on-year. The basic earnings per share is 0.22 yuan.
Key investment points:
The prosperity of soda ash and urea industries continued, and the company’s performance in the first quarter increased sharply. On April 22, 2022, the company released the first quarter report of 2022: in Q1 of 2022, the company realized an operating revenue of 2.681 billion yuan, a year-on-year increase of + 19.81% and a month on month increase of – 3.09%; The net profit attributable to the parent company was 792 million yuan, a year-on-year increase of + 137.79% and a month on month increase of – 72.42%; The net profit attributable to the parent company after deducting non profits was 790 million, with a year-on-year increase of + 138% and a month on month increase of + 7%. Compared with the same period last year, the company’s profit growth rate is significantly higher than the revenue growth rate. On the one hand, it is mainly due to the boom cycle of soda ash, urea and coal industries. In terms of soda ash, according to Baichuan Yingfu, the Jiangsu Lianyungang Port Co.Ltd(601008) 1.3 million T / a production capacity will be withdrawn by the end of 2021. It is expected that the production capacity of 800000 T / a of Anhui hongsifang and Jiangsu Debang will be delayed in 2022, adding to the rapid growth of demand in the downstream photovoltaic industry and the tight balance between supply and demand in the soda ash industry. According to wind data, since the beginning of 2022, the price of soda ash has rebounded. In 2022q1, the average prices of heavy alkali and light alkali in East China were 2694 and 2368 yuan / ton respectively, up 70% and 65% year-on-year respectively. As of April 24, 2022, the prices of heavy alkali and light alkali in East China were 2850 yuan and 2630 yuan / ton respectively, which is optimistic about the continued prosperity of soda ash industry. In terms of urea, the conflict between Russia and Ukraine has promoted the sharp rise of international urea prices. Although the company’s urea sales are mainly in the Chinese market, under the background of high overseas urea prices, China’s urea prices are expected to remain at a medium high level. The average price of urea in Shandong increased by 2732% year-on-year (Q1 / 2022). As of April 22, 2022, the price of urea (Shandong) in China is 2930 yuan / ton. The second quarter is the peak season of agrochemical demand. It is expected that the price of urea will rise steadily. In terms of coal, the company shares 34% equity of Mengda mining. Mengda mining is mainly engaged in coal mining and sales, with a coal production capacity of 8 million tons / year. Under the background of the prosperity of the coal industry, it has brought rich investment returns to the company, and the investment income included in the consolidated statement in the first quarter was 330 million yuan.
On the other hand, the company’s expense ratio has improved significantly during the period. In 2022q1, the company’s sales / management / financial expense ratio is 1.44% / 7.11% / 0.83% respectively, with a year-on-year change of -0.05 / – 4.92 / – 2.23 PCT and a month on month change of -0.20 / – 3.06 / + 1.70 PCT respectively. The management expense ratio has improved significantly, mainly because the company previously had many subsidiaries, some of which were impaired assets, and the management expense is high. In the fourth quarter of 2021, the company disposed of its subsidiaries Inner Mongolia Boyuan coal chemical industry and Inner Mongolia Boyuan United chemical industry. The first quarter report of 2022 was no longer included in the scope of consolidation, the total management expense decreased, and the management expense ratio decreased significantly. In Q1 2022, the net cash inflow from operating activities of the company was RMB 727 million, with a year-on-year increase of 29.01%.
Yingen mining project is advancing steadily, and the company can grow in the future
On July 25, 2021, the company acquired 9.5% equity of Yingen mining with 1.112 billion yuan and increased the capital of Yingen mining with 1.371 billion yuan. The company’s shareholding in Yingen mining increased from 19% to 36%. On December 24, 2021, the company announced that it planned to carry out a major asset restructuring. It planned to acquire 14% of the shares of Yingen mining held by nabichuan with RMB 2.086 billion and increase the capital of Yingen mining with RMB 3.725 billion. After the transaction is completed, the company will control Yingen mining and increase the shareholding ratio to 60%. Yingen mining project is planned to build an annual output of 8.6 million tons of natural alkali. Among them, the first phase of 3.4 million T / a soda ash and 300000 t / a baking soda are under full construction. It is expected to be completed by the end of this year and put into operation in the first half of 2023. The construction of phase II 4.4 million T / a soda ash and 500000 T / a baking soda will be started after the stable operation of phase I. The construction is expected to be completed by the end of 2025 and put into operation in the first half of 2026. The proposed new capacity of Yingen mining project is large, locking in most of the new capacity of the industry in the future. After the completion of the two phases of the project, the company is expected to become a leader in China’s soda ash industry. In addition, the company’s single ton cost of soda ash will be further reduced, and the gross profit margin of the company’s natural alkali sector is expected to be further improved. We are optimistic about the long-term growth brought to the company by the large-scale natural alkali project of Yingen mining.
The profit forecast and investment rating predict that the net profit attributable to the parent company in 2022, 2023 and 2024 will be RMB 3.232 billion, RMB 4.118 billion and RMB 5.452 billion respectively, and the EPS will be RMB 0.88, 1.12 and 1.48/share, corresponding to 10, 8 and 6 times of PE, maintaining the “buy” rating.
Risk tips: the price fluctuation risk of raw materials, the risk of sharp decline in product prices, the lower than expected downstream demand, the lower than expected construction and operation of Yingen mining project, and the deterioration of the debt of major shareholders.
