Long Mang Baili (002601): Acquiring the equity of Oriental Zirconium to perfect the layout of the zirconium industry

Long Mang Baili (002601): Acquiring the equity of Oriental Zirconium to perfect the layout of the zirconium industry
Recent situation of the company The company intends to use its own funds and bank loans to acquire Eastern Zirconium held by China Nuclear Group through an agreement transfer15.66% equity, transfer price 8.73 trillion, corresponding to the expected 8.98 yuan / share, the acquisition of early Eastern Zirconium currently continues to premium 26%.After the transaction is completed, the company will become the largest shareholder of Oriental Zirconium. Comment Dongfang Zirconium is a leading zirconium industry enterprise with complete industrial chain.The owner of Dongfang Zirconium is engaged in the research and development, production and sales of zirconium series products. The industrial chain is complete. It has independent intellectual property rights in core zirconia powders, zirconia ceramics, nuclear-grade sponge zirconium and other fields.The subsidiary 南京桑拿网 cooperated with Image in Australia to develop a number of mining area projects with abundant ore resources. At present, it is focusing on mining high-grade and replacing the bunalen project of zircon sand.Eastern Zirconium actively develops high-value-added emerging zirconium products on the basis of consolidating the basic product line. Its fund-raising projects include 18 million zirconia ceramic mobile phone back plates, an annual output of 1,000 tons of zirconia ceramic microbeads, and surgical implants.Industrialization project of zirconia ceramic powder for import.We expect that the construction of new projects will further increase the profitability of Oriental Zirconium and create a complete upstream and downstream industrial chain of zirconium products. The acquisition completes the company’s zirconium industry layout.南京桑拿论坛Although the purchase price has reached a 26% premium over Eastern Zirconium, the company will become the largest shareholder of Eastern Zirconium after the equity acquisition. We believe it will be the basis for the coordinated development of Eastern Zirconium and the company’s zirconium industry. At the same time, the acquisition improves the company’s zirconium industry layout and relies on the advantages of Eastern Zirconium Composite Zirconia Powder to expand to the downstream emerging zirconium products field, enhance the company’s core zirconium industry competitiveness, and promote the implementation and expansion of the company’s zirconium industry-related strategies. The expansion of the production capacity of the chlorination method contributed to the growth, and the integrated layout enhanced profitability.At present, the company’s 20 chlorinated chloride production capacity is under commissioning operation. We expect that the total production capacity of the company’s first and second phase chlorinated titanium dioxide will reach 30 in 2020. At the same time, the company’s acquisition and integration of Xinli Titanium Industry is expected to continue to increase titanium chloride.Production capacity of white powder, sponge titanium and high titanium slag, etc. We expect that the expansion of titanium dioxide production capacity will help the company continue to grow.At the same time, the company will use the titanium concentrate resources in Panxi area to build a 30 titanium chloride slag project. We expect to be able to fully meet the second phase 20 production of chlorinated titanium dioxide production, which will further improve the company’s industrial chain and enhance profitability. It is estimated to maintain the 2019/20 profit forecast26.At USD 2 / 3.1 billion, the current company merger corresponds to a price / earnings ratio of 19/20.6/8.1x.Maintain the target price of 17 yuan, which has 37% growth space compared with the previous one. The target price corresponds to 19/20 13 / 11x price-earnings ratio and maintain an outperform industry rating. Risk Titanium dioxide price changes, acquisition and integration exceeded expectations.