Western Securities: Oriental Zirconium Industry reverses to Zirconium rising step by step

The company issued a performance forecast for the semi-annual report for 2021. During the reporting period, the company expects to return to its parent with a net profit of 50 million yuan to 70 million yuan, an increase of 205.36 percent to 247.5 percent over the same period last year, and an estimated basic earnings per share of 0.0648 to 0.0907 yuan per share, an increase of 181.0 percent to 213.38 percent over the same period last year. The company's business restructuring and optimization, the layout of downstream high value-added industries.

During the reporting period, the company sold Chaoyang East Zirconium New Materials Co., Ltd. and acquired Jiaozuo Wiener Technology Co., Ltd., confirming the investment income and increasing the consolidated profits of Jiaozuo Wiener Technology Co., Ltd. improved the performance in the first half of the year. Wiener Technology's main products are nanometer zirconia and fused stabilized zirconia / powder, zirconia grinding media, zirconia structures and so on. it is widely used in petrochemical, automotive, electric power, mining equipment, mechanical manufacturing, medical devices, electronic ceramics and other emerging industries.

The company layout downstream high value-added industry, zirconium industry leading position is expected to be re-established. Zircon sand a new round of price cycle, the company's main business ushered in a reversal. At present, zircon sand is at the bottom of a long cycle, long-term depressed prices limit industry capital expenditure, major mining enterprises taste decline and resource depletion drive costs and production down, zircon sand is in a new round of price upward cycle. The company's zircon sand has been completely self-sufficient, in the zircon sand price increase process, the company has increased the price of products 5 times this year, the price increase is corresponding to substantial profit repair, the company's main business ushered in a reversal of performance.

The development of upstream resources is accelerated and long-term development is guaranteed. On June 21, 2021, the company announced the resumption of the Mingrui zirconium Mindarie project and the establishment of a joint venture with Hong Kong Baisheng Co., Ltd. in order to promote the progress of the WIM150 project. With the advent of the dragon python, the development of mines in Australia has accelerated, providing opportunities for long-term development and value discovery.

Investment suggestion: the estimated return net profit from 2021 to 2023 is 0.70 yuan 1.45 / 243 million, an increase of 143.5%, 107.6% and 67.6% over the same period last year, combined with the continuous improvement of the main business and the acceleration of Australian resource development to expand the economic benefits of the company's products and maintain the "buy" rating.

Risk tips: zirconium product price fluctuations, the impact of Sino-Australian import and export policy, novel coronavirus epidemic situation repeated.