Layout of New Energy Phosphorus Chemical Industry Maintains High Prosperity

Affected by the international geopolitical situation, global extreme weather and high food prices, the current traditional phosphorus chemical business such as phosphate fertilizers maintains a high boom range.

China Industry News has collected and sorted out the performance reports of 35 listed companies with phosphorus chemical concepts in the first quarter of 2022. The revenue of 31 companies including CMOC (603993.SH), Yuntianhua (600096.SH), Hengbang (002237.SZ), Xingfa Group (600141.SH), Luxi Chemical (000830.SZ), etc. year-on-year Growth; Tianyuan shares (002386.SZ), Wansheng shares (603010.SH), Fengle Seed Industry (000713.SZ) and Chenhua shares (300610.SZ) The revenue of four companies declined, respectively 3.898 billion yuan, 890 million yuan, 554 million yuan, 273 million yuan. In terms of profitability, only three companies, ST Jinzheng (002470.SZ), Luoping Zinc & Electric (002114.SZ) and Zhongdi Investment (000609.SZ), suffered losses. The net profits were: -26.06 million yuan, -44.37 million yuan, - 38.73 million yuan.

The operating income of the three companies exceeds 10 billion

There are three companies with revenue exceeding 10 billion, namely: Luoyang Molybdenum Industry, Yuntianhua, and Hengbang Co., Ltd.

CMOC is one of the world's largest producers of scheelite and one of the world's top seven molybdenum producers and a leading copper producer. CMOC achieved the best quarterly performance in history in the first quarter of 2022. In the first quarter of 2022, the company achieved operating income of 44.525 billion yuan, a year-on-year increase of 11.55%, and realized a net profit attributable to the parent of 1.792 billion yuan, a year-on-year increase of 77.88%.

According to the data, CMOC indirectly holds 100% equity of Brazil's CIL phosphate rock business and is the second largest phosphate fertilizer producer in Brazil. The business scope of the mine covers the entire phosphorus industry chain. The main products include high-concentration phosphate fertilizers (MAP, GTSP), low-concentration phosphate fertilizers (SSG, SSP powder, etc.), animal feed supplements (DCP), intermediate products phosphoric acid and sulfuric acid (sulfuric acid is mainly for own use. ) and related by-products (gypsum, fluosilicic acid), etc. Benefiting from the continuous rise in phosphate fertilizer prices since 2022, the net profit of CMOC's niobium and phosphorus business has reached a new high in a single quarter in recent years.

As one of the largest phosphate mining and dressing companies in my country, Yuntianhua achieved gratifying performance in the first quarter of this year. The company achieved an operating income of 14.962 billion yuan, a year-on-year increase of 13.28%, and a net profit attributable to the parent of 1.646 billion yuan, a year-on-year increase of 186.15%. Deducted non-net profit of 1.588 billion yuan, a year-on-year increase of 224%. Compared with the performance of the fourth quarter of last year, Yuntianhua's growth rate in the first quarter exceeded 100%.

Yuntianhua said that the reason for the year-on-year increase in the company's total profit during the reporting period was the company's earnest fulfillment of the responsibility of "guaranteeing supply and stable prices" of domestic fertilizers, seizing opportunities in the international market, effectively coordinating the domestic and international markets, and the average sales of major fertilizer products. Prices have risen year-on-year.

In just one year, Yuntianhua's business situation has "turned a corner". Investigating the reasons, industry insiders analyzed: "First, the overall supply of the international fertilizer market is tight, and the market price remains high, making the company the second largest in the world with its phosphate compound fertilizer production capacity, and has achieved rapid growth in sales and rising prices. Second, with the sharp rise in global commodity raw materials, the company itself is the largest phosphate rock mining enterprise in China, which makes the company's production cost more advantageous."

Among the three companies with revenue of over 10 billion yuan, Hengbang shares ranked third with 11.389 billion yuan. However, net profit fell by 10.31% year-on-year to 121 million yuan. In 2021, 45.41% of Hengbang's operating income will come from precious metal smelting, while ore powder sales and chemical production will account for 2.29% and 1.89%, respectively.

Recently, Hengbang Co., Ltd. stated on the investor interaction platform that the company's ammonium phosphate and other fertilizers include self-use and sales. The recent increase in fertilizer prices has boosted the company's performance. In 2021, the operating cost of sulfuric acid will be 255 million yuan. The company's sulfuric acid products are sold in both foreign and domestic directions. The foreign price is the long-term price, and the domestic price follows the market. At present, the company's average ex-factory price of sulfuric acid including tax is about 650 CNY/ton. In 2021, the sales price of sulfuric acid will rise, and the company's gross profit margin of sulfuric acid products will be 45.81%.

The net profit of the two companies increased by more than tenfold

There are two companies whose net profit has increased by more than ten times: Qingshuiyuan (300437.SZ) and Chuanjinnuo (300505.SZ). In the first quarter of 2022, Qingshuiyuan realized a net profit of 76.2063 million yuan, a year-on-year increase of 2114.93%. Chuanjinnuo achieved a net profit of 59.8321 million yuan, a year-on-year increase of 1192.74%

According to the data, Qingshuiyuan has 6 phosphorus trichloride production lines with a designed capacity of 160,000 tons, and is one of the important suppliers of polyfluoride. In addition, Qingshuiyuan also has a designed capacity of 22,000 tons of phosphorous acid and 130,000 tons of methyl chloride. According to the company's disclosure, the above raw materials are the important raw materials and by-products required for the upstream of the company's water treatment agent products. It can be seen that the company currently has an upstream and downstream industry layout.

In 2021, due to multiple factors such as dual control of energy consumption and strong terminal demand, the prices of yellow phosphorus and silicone have risen sharply. In this context, the raw material product of Qingshuiyuan, phosphorus trichloride (an important raw material is yellow phosphorus), has followed the rise, which has prompted the company's water treatment agent product prices to increase, and business revenue has increased year-on-year.

Due to the increase in sales and selling prices of phosphorus chemical products, in the first quarter of 2022, Chuanjinnuo achieved operating income of 443 million yuan, an increase of 86.16% year-on-year. Since last year, the company's production and sales have been booming, and its profitability has continued to improve. In the first quarter of this year, its gross profit margin of sales continued to remain above 20%, and its weighted average return on equity reached 3.91%.

Chuan Jinnuo said that the year-on-year increase in the company's net profit attributable to the parent during the reporting period was due to the rise in market prices of main products and the enhancement of profitability.

In terms of focusing on the main business and strengthening the synergy of the industrial chain, Chuanjinnuo will basically complete the production capacity construction of 100,000 tons of industrially purified phosphoric acid and 5,000 tons of iron phosphate in 2021, and will add industrially purified phosphoric acid products and iron phosphate products.

A number of companies are laying out new tracks

With the continuous increase in the installed capacity of lithium iron phosphate batteries in new energy vehicles, the traditional chemical sector has ushered in a good opportunity to "escape the shell", especially the industrial-grade phosphorus chemical stocks, which have the inherent advantage of switching tracks.

In fact, many phosphorus chemical companies have begun to deploy the lithium battery industry.

In October 2021, Hubei Yihua (000422.SZ) announced that it has reached a cooperation agreement with Ningbo Bangpu Times. The two parties will focus on iron phosphate, nickel sulfate and its front-end phosphate rock, phosphoric acid, sulfuric acid and other chemical raw materials. 

In 2020, Yuntianhua announced the establishment of a joint venture with Duofuo (002407.SZ) to plan the transition to new energy; in July 2021, Yuntianhua invested 7.286 billion yuan to build a new material precursor of lithium iron phosphate with an annual output of 500,000 tons Project; In February this year, Yuntianhua announced again that it signed a cooperation agreement with Yuxi City Government of Yunnan Province, Enjie Co., Ltd. (002812.SZ), Yiwei Lithium Energy (300014.SZ), and Huayou Holdings to jointly establish two joint ventures Company, and the total investment amount of the first and second phases exceeded 50 billion yuan.

An industry insider said: "After accelerating the transition to new energy, with Yuntianhua's dominant position in the phosphate rock industry chain and the background of the global shortage of phosphate rock resources in the next few years, the company's value is facing a reassessment."

Relying on the rich reserves of phosphate rock resources, integrated industrial facilities and the accumulation of chemical fertilizers and chemicals for many years, Yuntu Holdings (002539.SZ) is also deploying the production capacity of iron phosphate and related upstream raw materials. 350,000 tons, 100,000 tons of iron phosphate and its supporting wet-process phosphoric acid, refined phosphoric acid and other projects.

Xingfa Group (600141.SH) stated that the company and Huayou Cobalt (603799.SH) will cooperate around the entire industry chain of new energy lithium battery materials, and will cooperate in investing in phosphate rock in Yichang, Hubei in accordance with the principle of one-time planning and distribution implementation. The integrated industry of mining and selection, phosphorus chemical industry, wet-process phosphoric acid, iron phosphate and lithium iron phosphate materials, plans to build 500,000 tons/year of iron phosphate, 500,000 tons/year of lithium iron phosphate and related supporting projects.

On November 10, 2021, Chuanjinnuo signed the "Project Cooperation Framework Agreement" with the People's Government of the Port District of Fangchenggang City, Guangxi, and planned to invest in the construction of "50,000 tons/year battery grade lithium iron phosphate cathode material precursor material iron phosphate and The supporting 600,000 tons/year sulfuric acid project ""100,000 tons/year battery-grade lithium iron phosphate cathode material project" has laid a foundation for cooperation for Chuanjinnuo to invest in the construction of new energy material projects. In the first quarter of this year, the wet-process phosphoric acid purification and fine phosphate project invested and constructed by Chuanjinnuo has been completed and put into trial production. The production of this project further expanded the company's production scale and enriched the product structure.

According to industry forecasts, with the explosion of demand for power batteries and energy storage batteries, it is expected that the demand for lithium iron phosphate will reach 3.12 million tons in 2025, and the future growth potential is huge. As the key and core precursor raw material for the manufacture of battery-grade lithium iron phosphate, iron phosphate has broad market prospects in the future as policy-driven superimposed costs continue to decline.