Capital Securities: Gave Sanxiang New Material a buy rating

2022-01-20Wu Xuan of Capital Securities Co., Ltd. conducted a study on Sanxiang New Material and released a research report "Brief Evaluation Report of the Company: The Price of Zirconium Products Rises, and the Company's Performance Hits a Record High in 2021", this report gives a buy rating to Sanxiang New Material, and the current stock price is 21.62 yuan.

Sanxiang New Material (603663)

Core ideas

In 2021, the performance increased by 61.94%, in line with market expectations. On January 18, the company disclosed the annual performance pre-increase announcement, and it is expected that the net profit attributable to the shareholders of the listed company in 2021 will be about 100 million yuan to 105 million yuan, an increase of 54.23% to 61.94% year-on-year, and the net profit after deducting non-recurring gains and losses is expected to be about 93 million yuan to 98 million yuan, an increase of 55.54% to 63.90% year-on-year. Profits in 2021 hit record highs and were in line with market expectations.

The price of zirconium products rose significantly, boosting the performance of 2021 to a record high. In 2021, the price of zirconium products increased greatly, the current price of electrofusion zirconia was about 42500 yuan / ton, an annual increase of 82.8%, and the current price of sponge zirconium was about 235000 yuan / ton, an annual increase of 61.0%. The volume and price of zirconium-based products have risen together, boosting the performance of 2021 to a record high. As the leader of the domestic zirconium industry, the company currently has a production capacity of 26,000 tons of electrofusion zirconia, the purity of products is leading in the world, relying on its own Yangmeizhou hydropower station, the cost advantage is significant. Sponge zirconium current production capacity of 3000 tons, 2020 output accounted for about 75% of the domestic market, the company's electrofusion zirconium products at the same time to supply sponge zirconium production, integration cost advantage is obvious. It is expected that the price of zirconium products will remain at a high level this year, and the revenue of major products is expected to further increase.

Horizontally expand the industrial layout, diversified zirconium products gradually put into production. The company actively explores the layout of other zirconium products, plans to produce 20,000 tons of zirconium oxychloride, and the new technology "boiling chlorination method" has environmental protection and cost advantages, or will help the company successfully enter the mature market; the high-purity zirconia powder project has been officially put into production, and this year has entered the production capacity release period; the 1500 tons of special ceramic projects that have been raised and invested through the fixed increase are being actively promoted, and are expected to be gradually put into production this year and next year. Diversified product layout will bring new profit growth points to the company and stabilize the leading position of zirconium industry.

Wenda magnesium and aluminum is about to be put into production, helping the company's "zirconium + magnesium" dual main business development. At the end of 2020, the company and NINGDE Times jointly funded the establishment of Wenda Magnesium aluminum Technology Co., Ltd., planning to build a magnesium aluminum die-casting production line of 50,000 tons / year. At present, the plant construction and die-casting equipment are in place, and the structural parts of lightweight battery packs are being developed, expanding the field of magnesium alloy building formwork and aluminum alloy lightweight ships, and helping the company to open the "zirconium + magnesium" dual main business development.

Investment advice: As the company broadens the layout of zirconium products and the magnesium and aluminum alloy business is about to be put into production, the company's performance is expected to be gradually released, and the company's operating income is expected to reach 12.28, 16.37 and 2.082 billion yuan in 2021-2023, the net profit attributable to the mother is 1.04, 1.69 and 234 million yuan, and the EPS is 0.54, 0.88 and 1.22, respectively. Maintain a "Buy" rating.

Risk Warning: Zirconium product prices fell and the progress of new production capacity was less than expected

A total of 3 institutions have given ratings and 3 buy ratings in the last 90 days; the average target price of institutions in the past 90 days has been 40.0; the Securities Star Valuation Analysis Tool shows that Sanxiang New Materials (603663) has a good company rating of 3 stars, a good price rating of 2 stars, and a valuation comprehensive rating of 2.5 stars. (Rating Range: 1 ~ 5 stars, maximum 5 stars)