\u3000\u3 Shengda Resources Co.Ltd(000603) 260 Hoshine Silicon Industry Co.Ltd(603260) )
The industrial chain layout is perfect and the cost advantage is significant. The “buy” rating is given for the first time
As a global industrial silicon and silicone leading enterprise, the company has a perfect industrial chain layout of “coal electricity industrial silicon silicone / polysilicon”, with significant cost advantages. With the successive implementation of projects under construction and the continuous recovery of industry prosperity, the company’s performance is expected to usher in a centralized release. We predict that the net profit attributable to the parent company from 2022 to 2024 will be RMB 8.433 billion, RMB 10.852 billion and RMB 12.187 billion respectively, and the EPS will be RMB 785, RMB 10.10 and RMB 11.35 respectively. The current share price corresponds to 12.3, 9.6 and 8.5 times of PE from 2022 to 2024 respectively. “Buy” rating is given for the first time.
Industrial silicon: the supply and demand pattern is improving, and the profit center is expected to rise
On the supply side, the new capacity of China’s industrial silicon is strictly controlled, and the nominal capacity has been stable at about 5.3 million tons since 2017. With the continuous promotion of the double carbon target and the gradual tightening of environmental protection policies, the high cost and backward production capacity of small and medium-sized enterprises is expected to be further cleared. At the same time, due to the current high overseas energy prices and stricter carbon emission standards, the new capacity of industrial silicon will be very limited in the future, and there is still the possibility of production reduction. On the demand side, the silicon aluminum alloy, polysilicon and silicone industries have developed rapidly, and the demand for industrial silicon has accelerated. In 2021, China’s apparent consumption of industrial silicon was 2.01 million tons, a year-on-year increase of 21%. On the whole, the supply and demand pattern of industrial silicon is gradually improving, and the profit center can be expected to rise.
Organosilicon: short-term earnings fluctuate, and medium and long-term growth is worth looking forward to
The production expansion process of China’s silicone industry is accelerated. It is estimated that the new production capacity of China’s silicone monomer will reach 1.45 million tons and 800000 tons respectively from 2022 to 2023. Overall, in the short term, China’s new silicone production capacity will be put into intensive production, which may lead to a decline in profitability. However, from the perspective of medium and long-term demand, this should not be too pessimistic, because China’s emerging demand potential in the downstream field of silicone is very considerable, and there is still great room for upgrading the product structure. In the future, as China’s new production capacity is gradually digested, the profit of silicone may still maintain a high level.
Hoshine Silicon Industry Co.Ltd(603260) : cost is king, and capacity expansion and industrial chain extension help the company accelerate its take-off
Significant cost advantage is the company’s core competitiveness: (1) the industrial silicon and silicone production capacity rank first in the industry, with obvious scale effect; (2) Xinjiang self owned power plant + Yunnan base hydropower, the power cost is about 3000 yuan / ton lower than the industry average; (3) The graphite electrode is completely self-produced, further reducing the cost of raw materials. In recent years, relying on significant cost advantages, the company has continuously accelerated the pace of capacity expansion and industrial chain extension. With the successive implementation of projects under construction / to be built, we expect that the sales volume of industrial silicon and silicone of the company will increase from 530000 tons and 410000 tons to 1210000 tons and 760000 tons respectively from 2021 to 2024. At that time, the company’s performance is expected to usher in a centralized release.
Risk tip: the production capacity launch process is not as expected, the downstream demand has fallen sharply, the epidemic situation in China has been repeated, etc.
