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original title:Salt Lake Shares “King of Potash” is hard to make big money
Source: Talent Magazine
Baichuan information data shows that since March this year, the domestic price of potassium chloride, the main potash fertilizer, has reached 4,200 yuan / ton, a monthly increase of 20.86%, an increase of more than 106% compared with the same period last year.
Among the weak A shares, Salt Lake Shares (000792.SZ) may be one of the most ideal and realistic companies.
After the rebirth and resumption of trading in August last year, the stock price rose by 300%, although the share price of Salt Lake shares fluctuated greatly, but overall it is still “high.”
As of the close on March 14, since December last year,CSI 300 IndexWhile it fell 13.6%, Salt Lake shares rose nearly 5%. This is rare for stocks that were hotly hyped on the day of resumption of trading and once had a daily turnover of 30 billion yuan.
In addition to the well-known imagination of “extracting lithium from salt lakes”, the stock price is also supported by the reality of the “King of Potash Fertilizers”.
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Potash fertilizer gross profit accounts for over 90%
After the rapid progress of the concept of “Lithium Extraction from Salt Lake” last year, there is no need to say much about the competitiveness of Salt Lake’s lithium carbonate.
In addition to the 30,000 tons of production capacity owned by Lanke Lithium, which holds 51.42% of the shares, Salt Lake shares andBYDThe pre-construction preparations for the 30,000-ton battery-grade lithium carbonate project jointly constructed have also been basically completed. The 10-fold increase in lithium carbonate in one year and the certainty of new energy vehicles have brought a considerable valuation premium to Salt Lake shares.
But for the current market value of Salt Lake shares as high as 160 billion, lithium carbonate is just the icing on the cake, and the basic performance support comes from potassium chloride.
Potassium is one of the three essential nutrients for crop growth. It has the ability to enhance the drought resistance, cold resistance, disease resistance, salt resistance and lodging resistance of crops. It has a significant effect on stable and high yield of crops. Therefore, almost every crop needs an appropriate amount. Apply potassium fertilizer.
Among all potassium fertilizer varieties, potassium chloride plays a leading role in agricultural production due to its high nutrient concentration, abundant resources and relatively low price, accounting for more than 95% of the amount of potassium fertilizer applied.
Salt Lake Co., Ltd. is sitting on the Chaerhan Salt Lake, the largest soluble potassium-magnesium salt deposit in China. The reserves of potassium chloride, magnesium chloride, lithium chloride, and sodium chloride all rank first in the country, of which the reserves of potassium chloride are about 540 million tons.
Based on this, Salt Lake Co., Ltd. is the largest potassium chloride producer in China, accounting for nearly 64% of its production capacity. In 2020, 5.5175 million tons of potassium chloride will be produced, accounting for 78.37% of the national total. In that year, the sales volume reached 6.449 million tons, and the production and sales volume far exceeded that of Zangge Holdings,Potassium Internationaland other comparable companies.
In terms of gross profit margin, Salt Lake shares are also the best, reaching 65.09% in 2021H1.
The 2021 semi-annual report shows that Salt Lake’s potassium chloride business accounted for 81.52% of its revenue, and its gross profit accounted for more than 90%. Potassium chloride is also regarded as “ballast stone” by Salt Lake Shares.
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Geopolitical conflicts exacerbate the imbalance between supply and demand of potash fertilizers
The price line of “ballast stone” can also be called the lifeline of Salt Lake shares. After a 10-year downturn since 2010, the price of potassium chloride has entered an upward range in the past two years.
Baichuan information data shows that since March this year, the domestic price of potassium chloride, the main potash fertilizer, has reached 4,200 yuan / ton, a monthly increase of 20.86%, an increase of more than 106% compared with the same period last year.
There are indications that the upward trend is expected to continue.
The global distribution of potassium chloride is uneven. Canada, Russia and Belarus account for more than 68% of the world’s reserves, and Russia and Belarus account for 34.5% and 12.9%, respectively. my country’s potash resources account for only 6% of the world’s total, and potash fertilizers are relatively dependent on imports. In 2020, my country’s potash fertilizer import dependence will be higher than 50%.
In terms of supply, since August last year, domestic potassium chloride stocks have continued to decline, and will be at a nearly three-year low in 2022. And the global potash fertilizer production capacity is growing slowly.Huaan SecuritiesThe research report shows that in the past five years, the global potash fertilizer production capacity CAGR is only about 3.6%, and IFA predicts that the global potash fertilizer production capacity will increase to about 69.96 million tons by 2024, with a CAGR of 2.4%.
Demand is more optimistic.
agricultural productsThe boom cycle of 2019 will drive the demand for potash fertilizer to rise. On the one hand, the decline in per capita arable land is stimulating the increase in the use of potassium fertilizer per unit crop. In addition, the spring ploughing season will also bring stimulation; on the other hand, the surge in crude oil prices will not only increase the cost of food production and transportation, but also increase the cost-effectiveness of bio-alternative energy.
Not only that, under the influence of the epidemic in the past two years, while the global destocking of agricultural products has accelerated, the supply has been disturbed and cannot keep up. Food security has attracted much attention, and food prices have risen sharply. The recovery of the global economy from the epidemic will in turn increase the demand for food. This will stimulate the enthusiasm of food production, thereby increasing the demand for potassium fertilizer.
The situation of short supply supports the global potash fertilizer prices. However, due to the high dependence on imports of potash fertilizers in my country, it is difficult not to be affected.
The geopolitical conflict has added uncertainty to the shortage of potash fertilizer. Russia and Belarus are both major potash fertilizer suppliers in the world. Even if the geopolitical conflict ends, it is difficult to say that the sanctions will be lifted.
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Big money is hard to make
But why did the price of potassium chloride rise, but the share price of Salt Lake shares did not move?
In addition to being emotionally dragged down by the sharp drop in the index, and technically the capital’s scruples about holding up above, there are also some fundamental factors.
The first is performance.
According to the 2021 performance report of Salt Lake, the net profit attributable to shareholders of listed companies in 2021 will be 4.268 billion yuan, a year-on-year increase of 109.27%.
It is estimated that the net profit in the fourth quarter was 553 million yuan, which was significantly lower than the 1.321 billion yuan in the second quarter and 1.601 billion yuan in the third quarter, even less than the 793 million yuan in the first quarter.
Huaxin Securities analyzed that the fourth-quarter performance of Salt Lake Co., Ltd. was lower than expected, mainly due to the return of income from the subsidiary Salt Lake Energy, ecological environment restoration and management, and compensation for ecological environment damage. Lanke Lithium’s sales volume of lithium carbonate was also one of the reasons.
And business structure.
Although the share price of Salt Lake shares was flat, potassium chloride, which is also mainly engaged in potassium chloride, was generally higher. As of March 14, Asia Potash International has risen by more than 8% this year, far outperforming the broader market.
Unlike Salt Lake, where almost all of its business is located in China, Asia Potash International’s products are only for foreign countries. With the Laos production base as the core, it mainly faces the Asian market mainly in Southeast Asia. Most countries in East Asia and Southeast Asia rely on potash fertilizer imports as high as 100%. Its performance is more sensitive to changes in potash prices.
In contrast, potash fertilizer is an important strategic resource for agricultural development. my country has established a strategic reserve of potash fertilizer, which can take targeted measures to ensure supply and stabilize prices in due course in light of market conditions. This inhibits the speculative factors of domestic potash fertilizer, and also limits the rising space of potash fertilizer price.
Of course, the impact of supply and demand will not be fundamentally reversed, but the increase in potash fertilizer prices should not hurt agricultural production too much. This determines that it is difficult for Salt Lake shares to have excessive returns in the potash rise.
Author of this article | Zhang He
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Responsible editor: Zhang Yi