Chanhen(SZ:002895) HTSC·2026-01-25 13:35Investment Rating - The report initiates coverage on Chuanheng Co., Ltd. with a "Buy" rating, assigning a target price of RMB 50.73 based on a 19x PE for 2026 [1][8][6]. Core Insights - Chuanheng Co., Ltd. is a leading player in the domestic phosphate chemical industry, possessing a nominal phosphate rock capacity of 3.3 million tons. The company's self-owned phosphate mines contribute to its high gross margin in the industry. The global phosphate supply-demand balance is expected to remain tight in the next 1-2 years, benefiting the company. Additionally, the anticipated growth in demand for new energy is expected to enhance the company's revenues from products such as iron phosphate, ammonium phosphate, and phosphoric acid [1][15][19]. - The company is projected to achieve a net profit of RMB 1.31 billion, RMB 1.62 billion, and RMB 1.8 billion for the years 2025-2027, representing year-on-year growth rates of 37%, 24%, and 11%, respectively [6][12]. Summary by Sections Phosphate Industry Outlook - The global expansion of phosphate rock production is slow due to limited new supply and stringent regulations in China. The demand for phosphate fertilizers is expected to grow by 3% annually starting in 2024, driven by the expansion of arable land and increasing demand for new energy [2][14]. - The report estimates a global phosphate supply-demand gap of approximately 1.78 million tons, 0.95 million tons, and 1.21 million tons for the years 2025-2027, indicating a continued tight supply situation [2][15]. New Energy Demand - The demand for phosphate chemical products related to new energy is anticipated to recover, particularly for iron phosphate and industrial-grade ammonium phosphate, as the industry shows signs of improvement due to rising storage and power battery demands [3][16]. Financial Performance and Valuation - The company has entered a growth phase, with a significant increase in net profit expected. The debt ratio has improved, and the dividend payout ratio has increased to around 70%, with projected dividend yields of 3.7%, 4.5%, and 5.0% for 2025-2027 [17][33]. - The report highlights that the company’s gross margin is among the highest in the industry, supported by its strong export capabilities and the non-fertilizer use of its phosphate products [4][28]. Market Perspective - The report contrasts its views with market concerns regarding the sustainability of tight phosphate supply. It argues that the demand for phosphate fertilizers remains robust, and the regulatory environment will continue to support high phosphate prices [5][18].