Salt Lake Co., Ltd. (000792) Annual Report 2018 and 2019 First Quarterly Report Comments: Potash Business Volume and Price Rise, Expecting Profitability to Gradually Repair

Salt Lake Co., Ltd. (000792) Annual Report 2018 and 2019 First Quarterly Report Comments: Potash Business Volume and Price Rise, Expecting Profitability to Gradually Repair
Core point of view As chemical projects may drag down performance, the company’s net profit attributable to mothers decreased in 2018.500 million.Considering that the company is a domestic potash fertilizer leader, it will fully benefit from the high prosperity of the potash fertilizer industry; the release of lithium carbonate capacity will promote driving performance growth, and we look forward to the company’s future profitability gradually repairing.The company’s EPS for 2019-21 is predicted to be 0.06/0.11/0.24 yuan, maintain target price of 12 yuan and “buy” rating. Potash fertilizer business volume and price rose, chemical projects are expected to weigh on performance.The company achieved operating income of 178 in 2018.900 million, +52 per year.9%; net profit attributable to mother may be 34.500 million, a previous loss reduction of 7.10,000 yuan.In the first quarter of 2019, operating income was 41.5 trillion, +53 a year.8%; net profit attributable to mother may be 2.6 trillion, a loss of 874 trillion a year.In 2018, due to the increase in volume and price of potash fertilizer business and the expansion of chemical project capacity, the company’s operating income increased; however, due to the increase in the load of chemical projects, consideration of comprehensive expenses such as depreciation, indicators, labor costs and asset impairment, dragged down the competitionforce. Potash fertilizer is expected to continue the high economic prosperity, and the company will fully benefit.Benefiting from global demand growth and limited capacity expansion, the prosperity of the potash fertilizer industry continued to increase in 2018; during the period, the company’s potassium chloride sales were 468.8 highest, average maximum budget growth of 16.5%.We believe that the prospect of high potash fertilizer is expected to continue under the expected recovery of agricultural product prices; the company replaces 500 tons of potassium chloride production capacity, accounting for more than 50% of the total domestic production capacity, and is expected to be the biggest beneficiary of potash price increases.We estimate that for every 100 yuan / ton increase in the price of potassium chloride, the company’s EPS will increase by 0.09 yuan. The price of lithium carbonate is expected to bottom out, and the release of production capacity will drive performance growth.In 2018, due to the rapid expansion of capacity in the lithium carbonate industry and weak downstream demand, product prices continued to decline.However, as the current price level has fallen to the lowest cost of SMEs, gradual accumulation is expected to be gradually phased out; transforming future demand growth, prices are expected to bottom out and rebound.Among the company’s “2 + 3杭州桑拿网” lithium carbonate projects, 2 budget projects have completed 55% of the progress, and plans to start trials this year; 3 replacement projects are in the early stages of preparation.After the project has reached full capacity, the company will have six single-cell lithium carbonate production capacity, which is expected to grow into a domestic leader. Risk factors: Debt-to-equity and supply-side “6636” projects are less than expected; global force majeure factors affect the demand for potash fertilizer; the downward trend of lithium carbonate prices exceeds expectations; Investment suggestion: The company is a domestic potash fertilizer leader, which will fully benefit from the high prosperity of the potash fertilizer industry; the release of lithium carbonate production capacity will promote driving performance growth, and we look forward to the company’s future profitability gradually repairing.Due to the company’s chemical business, the magnesium business started less than expected, and the short-term drop in lithium carbonate prices exceeded expectations, lowering the company’s net profit forecast for mothers to 2019 to 1.59/3.1.5 billion (previous forecast was 1.92/4.740,000 yuan), plus the net profit forecast for mothers in 2021 is 6.63 ppm, corresponding to 0 EPS in 2019-21.06/0.11/0.24 yuan.We use the segment assessment method for the company: 1) the potassium fertilizer sector has steadily improved due to resource scarcity and profit prospects, estimated at about 70 billion; 2) the lithium carbonate sector is estimated at about 4.5 billion; 3) the chemical sector is fully accrued under the most pessimistic assumptionImpairment of assets is expected to not exceed 40 billion.According to the above analysis, we maintain the target price of 12 yuan and maintain the “Buy” rating.

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