-ST Salt Lake (000792) Significant Events and 2019 Annual Results Preview Comment: Replacement of Assets Stripped and Optimistic about Potassium Leader Nirvana Rebirth

* ST Salt Lake (000792) Significant Events and 2019 Results Preview Comment: Replacement of Assets Stripped and Optimistic about Potassium Leader Nirvana Rebirth

The company intends to transfer the salt lake asset package for 3 billion U.S. dollars, with an estimated loss of 41.7 billion U.S. dollars in asset disposal. The company expects that the net profit attributable to mothers in 2019 will be reduced by 43.2 to 47.2 billion yuan and the equity attributable to mothers will be -28.6 billion US dollars.

The company intends to settle its debts to creditors by converting capital reserves into share capital. We believe that the probability of completion of the debt-to-equity swap is very high.

Based on the assumption that the asset package is divested and the debt-to-equity swap is successfully completed in 2020, the company’s net profit attributable to the parent in 2020/2021 is expected to be US $ 3.5 / 3.7 billion, maintaining the “buy” level.

In 2019, it is estimated that there will be a loss of 41.7 billion in asset disposal, and the net profit attributable to mothers is expected to increase by 43.2 to 47.2 billion.

  The company plans to package Yanhu shares assets (including fixed assets, construction in progress, intangible assets, inventories of the chemical branch company, and the entire equity of the holding subsidiaries Yanhu Magnesium and Haina Chemical, and debt receivables at a price of US $ 3 billion)) The agreement was transferred to Qinghai Huixin Asset Management with an estimated loss of USD 41.7 billion in asset disposal.

The combined company’s daily operations, pending lawsuits, repurchases of shares and other losses, the company estimates that the net profit attributable to the parent in 2019 will be 43.2 billion, due to the parent company’s owner’s equity-28.6 billion.

The best baggage was removed, leaving only high-quality potassium and lithium assets.

The divestiture of the company’s assets is an important reason for the expansion in recent years (asset impairment of operating mergers).

After the completion of the divestiture, the company’s remaining assets are mainly potassium fertilizer and lithium carbonate.

Salt Lake’s potash fertilizer is one of the world’s highest quality similar assets, with a domestic market share of more than 60%, and its cost advantage industry leads.

The company’s lithium carbonate production capacity has also reached full production, and the production and sales volume in 2019 is expected to reach 1.

1 Initially, currently under construction 2 Initial lithium carbonate production capacity, the company’s lithium carbonate cost is about 3.

50,000 yuan / ton, also has complementary competition in the industry.

If the debt-to-equity swap is successfully completed, the company’s net assets will be positive.

The company’s announcement plans to increase the capital reserve by 26.

4.7 billion shares, of which about 25.

7.6 billion shares will be used to settle debts to creditors, and the remaining approximately 70.75 million shares will be transferred by the undertaker who intends to dispose of the assets conditionally and for compensation.

As of the third quarter of 2019, the company’s long-term and short-term borrowings should total approximately 38 billion US dollars of interest-bearing debt such as bonds. From this, it is estimated that the debt-to-equity price is about 14 yuan per share.

We believe that the company, as an important state-owned asset and a scarce resource, has a high probability of completing the debt-to-equity swap. If the debt-to-equity swap is successfully completed, the company’s net assets will turn positive in 2020.

The company is expected to turn around in 2020, with an estimated net profit of 3.5 billion yuan.

After shortening the divestiture of the asset package, the company added 500 tons of potassium fertilizer and 1 injection of lithium carbonate production capacity, 重庆耍耍网 and another 2 injections of lithium carbonate production capacity to promote production in 2020.

Based on the current prices of potassium chloride and lithium carbonate, the company’s gross profit will exceed 6 billion by 2020.

At the same time, if the debt-to-equity swap is completed, the company’s interest-denying level will be greatly reduced. It is expected that the company’s annual financial expenses will be reset to a level of less than 800 million US dollars in 2018.

Based on comprehensive judgments, we expect that after the company’s asset package divestiture and debt-to-equity swap is completed, the net profit attributable to the parent in 2020 is expected to reach US $ 3.5 billion.

Risk factors: Due to the expected three consecutive years in 2017-2019, the company is likely to be suspended from listing.

  At present, the company’s main risk is the risk of 四川耍耍网 termination of listing: 1) Failing to reduce asset packages or other operating risks leading to continued losses in 2020; 2) Failing to convert debt into equity results in a negative net asset in 2020;Unable to express opinion, negative audit report; 4) Disclose the 2020 annual report within the statutory period every year; 5) 2020 operating income is less than 10 million yuan.

The risks in the company’s daily operations include: 1) the price of products has fallen significantly; 2) the release of increased production capacity has fallen short of expectations.

Investment suggestion: Based on the assumption that the expected asset package divestiture and debt conversion stock will be successfully completed in 2020, we estimate that the company’s net profit attributable to the parent in 2020/2021 will be 3.5 / 3.7 billion yuan (the original forecast was 3).

15/6.

6.3 billion).

With reference to the historical forecast levels of global potash leader Canada Potash and Agrium (average 18xPE), and considering that the current potash price is still at a historical position, we believe that the company’s reasonable allocation range is 20-24xPE, and the target city value range in 2020 is 700-840 ppm, offsetting the thickening of equity caused by debt-to-equity swaps, is still up 60% from the company’s existing equity value.

We are optimistic about the company’s divestiture of the asset package and completion of the debt-to-equity swap. The thorough high-quality potassium fertilizer assets have achieved a significant improvement in profitability, replacing the equity thickening effect brought by the debt-to-equity swap. The company’s existing equity value is still about 60%.Into “rating.