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Xinyangfeng continues to expand its product portfolio through investments; the 300,000-ton synthetic ammonia capacity expansion project is set to go into operation in the second half of the year. Author/Source: Date: 2022-06-27 Clicks: 15 With the strong demand for fertilizers on one hand and the promising prospects for lithium iron phosphate on the other, Xinyangfeng (000902)(000902.SZ), being at the forefront of these trends, is facing new opportunities for growth. At the 2021 annual performance briefing held recently, Xinyangfeng stated that there will be little new production capacity for ferric phosphate across the industry this year, and profitability is expected to be good. Based on the current situation, the gross profit per ton of ferric phosphate this year is about 50% higher than it was in August last year; therefore, the company’s profitability from ferric phosphate will be at a relatively high level this year. Next year, the lithium iron phosphate industry will remain in a tight balance, with profitability expected to stay at a good level. The first iron phosphate project has achieved standard production. Recently, Hubei Fengli New Energy Technology Co., Ltd., a joint venture between Xin Yangfeng and Changzhou Lithium Source, announced good news: the 50,000-ton/year iron phosphate production line it invested in and constructed is now operating at standard levels. This marks a solid first step for Xinyangfeng in the new energy industry sector. The phosphate iron production line with an annual output of 50,000 tons, built by Hubei Fengli Investment, is located adjacent to the Zhongxiang production base of Xinyangfeng, which has the longest industrial chain and the widest range of products. This base can not only supply raw materials such as ammonium phosphate for industry to Hubei Fengli on short notice, but it is also located next to the Lianhua Mountain phosphate mine, allowing phosphate ore to be transported directly from the mine to the production workshops via conveyor belts. It is worth noting that this is New Yangfeng’s first attempt at entering the new energy industry. As the leading enterprise in China’s phosphate fertilizer industry, Xinyangfeng possesses a phosphate mine with an annual production capacity of 900,000 tons. Its parent company, Yangfeng Group, holds nearly 500 million tons of phosphate resources, providing it with strong resource support. Thanks to its abundant phosphate ore resources, a complete integrated phosphate chemical industry chain, and years of operational experience in the industry, Xin Yangfeng enjoys significant cost advantages and industrial synergy benefits in the development of iron phosphate products. It is reported that the Hubei Fengli lithium iron phosphate project began construction in September 2021 and was completed and put into trial operation at the end of April 2022. After more than a month of debugging and improvement, the quality parameters of the ferric phosphate products manufactured at present have met the requirements of downstream lithium iron phosphate manufacturers. The compliant operation of this production line helps Xinyangfeng expand its product portfolio in the phosphorus chemicals industry, enabling it to make a rapid start in this new field. According to the person in charge of the project, prior to 2021, the scale of most lithium iron phosphate production lines in the industry was in the range of thousands of tons. Hubei Fengli’s 50,000-ton lithium iron phosphate production line is the first production line in the industry to achieve standard production at this scale. The achievement of targeted production levels for this project will help Xinyangfeng meet the market demand for iron phosphate. It will also enable Xinyangfeng to expand its product portfolio within the phosphorus chemical industry chain, thereby seizing opportunities in the new energy sector and facilitating its rapid progress in this new field. In 2021, in order to diversify the product portfolio of its phosphate chemical industry chain, seize the opportunities presented by the new energy market, and meet the growing demand for new energy materials both domestically and internationally, Xinyangfeng established a wholly-owned subsidiary named Yangfeng Chuyuan New Energy Technology Co., Ltd. It built production facilities for ferric phosphate in Zhongxiang and Yidu, Hubei Province; an investment of 6 billion yuan is planned for the construction of facilities capable of producing 300,000 tons of ferric phosphate, 150,000 tons of lithium iron phosphate, as well as related supporting projects. Upon completion, the project will enable the company to expand its operations within the phosphorus chemical industry chain. It will also foster strong synergies with the company’s existing businesses in phosphate rock and compound fertilizers, thereby consolidating its leading position in the phosphorus chemical sector and enhancing its overall profitability. On the path to industrial transformation and upgrading, Xinyangfeng is accelerating its efforts, making substantial investments and achieving significant development, with continuous investment initiatives. On April 11, 2022, Xinyangfeng announced that its wholly-owned subsidiary Yangfeng Chuyuan intended to invest a total of 6 billion yuan in building a project for the processing of phosphorus chemicals and the comprehensive utilization of fluorosilicon resources associated with phosphate mines in Ruichang, Jiangxi. Its investment projects cover three industries: phosphorus chemicals, fluorosilicon chemicals, and new energy materials. On May 20, Xinyangfeng announced that its wholly-owned subsidiary, Yangfeng Chuyuan, plans to invest 1.2 billion yuan in the development of a project for the comprehensive utilization of resources associated with phosphate mines in Dongbao District, Jingmen City, Hubei Province. By increasing its investments in the new energy sector and expanding its phosphorus chemical industry chain, Xin Yangfeng has successfully launched a second growth curve. The transition to new energy and high-end phosphorus chemical industries is a crucial strategic move for Xinyangfeng to comprehensively enhance its competitive edge. Leveraging its abundant phosphate ore resources and nearly four decades of experience in phosphorus chemical production, the company has swiftly secured a leading position in this industry’s transformation process. This not only helps to solidify its dominant market standing in the fertilizer sector, but also enables it to develop the new energy industry into a second core business after fertilizers. Such efforts will pave the way for a new growth trajectory and expand its future profit potential. This has led to the evolution from a single phosphate and compound fertilizer industry to a “two main and one auxiliary” industrial pattern, with phosphate and compound fertilizers and new energy as the two main businesses, and phosphogypsum building materials as the auxiliary business. Ongoing investment has led to a significant increase in production capacity. According to the financial reports, in 2021 Xinyangfeng achieved revenue of 11.802 billion yuan, representing a year-on-year increase of 17.21% ； The net profit attributable to shareholders of the listed company reached 1.210 billion yuan, a year-on-year increase of 28.22%. In the first quarter of 2022, Xinyangfeng’s revenue was approximately 4.545 billion yuan, representing a 37.25% increase compared to the same period the previous year ； The net profit attributable to shareholders of the listed company was approximately 407 million yuan, a year-on-year increase of 24.14%. The continuous growth in revenue and profits is attributed to the company’s advantages in industrial chain integration. In its recent response to investor questions, Xinyangfeng stated that in terms of the compound fertilizer business, the company’s sales of such fertilizers have been growing steadily; the first phase of the Gansu Jinchang production facility will come online in the second half of the year, which will help boost sales of autumn fertilizers ； In terms of the iron phosphate business, the company’s first-phase iron phosphate project in partnership has been successfully put into operation, while the second-phase project in Zhongxiang and the Yidu project are also expected to begin operations by the end of the year ； In terms of industrial chain integration, the company’s 300,000 tons per year synthetic ammonia capacity expansion project is set to come online in the second half of the year. As a large listed company that integrates research and development, production, and distribution of high-concentration phosphate fertilizers as well as new types of fertilizers, Xinyangfeng has seen its business scale expand continuously since its establishment. Annual report data show that the company has ranked first in the industry for many years in the areas of ammonium phosphate and compound fertilizers. In addition to its capacity to produce around 9 million tons of various high-concentration phosphate fertilizers per year, Xinyangfeng is also capable of producing 2.7 million tons of sulfuric acid, 150,000 tons of synthetic ammonia, and 150,000 tons of nitric acid per year. The company has a production capacity of 1.85 million tons of monoammonium phosphate (including 150,000 tons per year of industrial-grade monoammonium phosphate), ranking first in the country. Its products meet the company’s own needs in full, and a portion of them can also be exported. Once the 300,000-ton synthetic ammonia capacity expansion project is put into operation in the second half of the year, Xinyangfeng’s self-sufficiency rate will increase significantly. Moreover, the thermal energy conversion efficiency of the new process is over 10% higher than that of the old process, the energy consumption per ton of ammonia will be reduced by 30%, and pollutant emissions will be substantially lower compared to existing traditional synthetic ammonia plants. Next, Xinyangfeng will also establish a phosphogypsum research institute to increase efforts in the development of phosphogypsum products with greater functionality and higher added value, thereby transitioning toward the fine chemical industry. The company aims to remain at the forefront of phosphogypsum utilization in this sector, with the goal of achieving 100% utilization of phosphogypsum across the entire company by 2025. In addition, Xinyangfeng is the only company among the top three in the compound fertilizer industry that has the right to import potassium fertilizers on its own; the potassium fertilizers imported each year can meet half of the company’s production needs. Financial data shows that since 2016, the company’s revenue has increased from 8.276 billion yuan to 11.802 billion yuan in 2021, with a compound growth rate of 7.4%. The net profit attributable to the parent company rose from 563 million yuan to 1.21 billion yuan in 2021, reflecting a compound growth rate of 13.6%. Xinyangfeng stated that the next three years will see strong and certain growth in the company’s performance; the capital expenditures made by the company over these two years will begin to generate significant additional profits. The company continues to expand upstream and downstream along the industrial chain through vertical integration. By establishing a leading cost advantage within the industry and adopting more flexible sales policies for compound fertilizers, it manages to increase its market share. The ongoing operation of upstream facilities also enhances the profitability of compound fertilizers. At the same time, ferrophosphate and synthetic ammonia production will begin this year, and these new projects will contribute to profits for the entire year next year. By 2024, the new projects at the Jiujiang facility will be operational again, and there is a high degree of certainty regarding increased profits in the next one or two years. The company uses the strong cash flow generated by compound fertilizers to invest in new energy projects such as iron phosphate and fluorine chemicals, thereby driving a continuous increase in EPS. In the future, Xinyangfeng will focus on its \"green development\" strategy, seizing opportunities for industry consolidation and transformation and upgrading. Through product innovation, model innovation, resource integration, and internationalization, it will create three model projects, establish four research platforms, build sustainable innovation capabilities, set industry benchmarks, and continue to contribute to the green development of agriculture in China.