The company is a high-quality chlor-alkali chemical enterprise, caustic soda and PVC industry boom is expected to drive the company's product prices and sales growth, with calcium carbide prices continue to rise, the company as an integrated calcium carbide synthesis PVC enterprise is expected to benefit. We are optimistic that the company's performance will continue to release. It is estimated that the company's EPS in 2021-23 will be 0.57max 0.67max 0.73 yuan respectively. Considering the compound growth rate of 17% in the next few years, we will give 17xPE in 2021, corresponding to the target price of 10 yuan, with a "buy" rating for the first time.
The performance of high-quality chlor-alkali chemical enterprises is expected to reach a new high. The company takes chlor-alkali chemical industry as its core business, and has formed PVC resin, caustic soda, calcium carbide and other chemical products production and operation, warehousing, logistics and other related business. At present, the company has 300000 tons of PVC resin, 250000 tons of caustic soda and other important production capacity. The company's performance began to turn from loss to profit in 2015, with fluctuations rising. With the upswing in the industry of products such as caustic soda and PVC so far this year, the company's performance is expected to hit a new high.
Calcium carbide prices continue to rise, integrated calcium carbide synthesis of PVC enterprises are expected to benefit. In late March 2021, the price of calcium carbide reached a 10-year high, with the highest price in eastern China reaching 5500 yuan per tonne. Although the price of calcium carbide has become increasingly stable recently, it has risen by about 65% compared with the same period last year. Under the background of energy double control policy superimposed carbon neutralization and carbon peak policy, calcium carbide as a high pollution and high energy consumption industry, power production will further tend to be normal, calcium carbide supply decline and prices continue to rise will directly affect the profits and stable production of calcium carbide PVC enterprises, integrated calcium carbide synthesis PVC enterprises are expected to benefit.
PVC downstream demand continues to grow, capacity supply is still tight, the business cycle is expected to continue. Since the beginning of 2021, the price of PVC has risen from about 7000 yuan / ton at the beginning of the year to 9000 yuan / ton, an increase of 28%. At present, the price of PVC has broken through the 5-year high. In the post-epidemic era, with the global resumption of work and production, the downstream demand of PVC is expected to grow explosively; at the same time, the upstream supply is still in a tight state due to the extremely cold weather and the arrival of equipment maintenance period, resulting in PVC prices remain at a high position.
The company develops new products specially mixed with PVC resin to enhance profitability and broaden the moat. The company has carried out in-depth cooperation with Sichuan University and Yunnan Zhengbang Science and Technology Co., Ltd. to continuously increase the R & D investment in special blended PVC resin. In the first half of 2020, the PVC blending resin developed by the company has been sold, which can partially replace the paste resin and is expected to further increase the company's gross profit margin.
The completion of the buyback demonstrates the company's confidence in future development. According to the company announcement, the company has completed the repurchase of 17.99 million shares, accounting for 2.95% of the total share capital, and the repurchased shares will be used for follow-up employee stock ownership plans and / or equity incentive plans, reflecting the company's management's confidence in future development.
Risk factors: 1) large fluctuations in raw material prices; 2) large fluctuations in product prices; 3) the risk of underutilization of the company's capacity; 4) the risk that downstream demand is lower than expected.
Investment suggestion: the company is a high-quality chlor-alkali chemical enterprise, caustic soda and PVC industry boom is expected to drive the company's product prices and sales growth, with calcium carbide prices continue to rise, the company as an integrated calcium carbide synthesis PVC enterprise is expected to benefit. We are optimistic that the company's performance will continue to release. It is estimated that the company's EPS in 2021-23 will be 0.57max 0.67max 0.73 yuan respectively. Considering the compound growth rate of 17% in the next few years, we will give 17xPE in 2021, corresponding to the target price of 10 yuan, with a "buy" rating for the first time.
