Event: In the first half of 2021, the company achieved revenue of 758 million yuan, +54.78% year on year; achieved net profit of 41 million yuan to the mother, +9.57% year on year. In the second quarter alone, the company achieved revenue of 435 million yuan, +46.50% year on year and +34.77% month on month; achieved net profit of 20 million yuan to the mother, -38.95% year on year and +0.74% month on month.
Special polymer materials have entered a rapid release period.
Demand in the traditional market for modified plastics such as home appliances is low, the prices of raw materials continue to rise, and the company's traditional business has been impacted, and the increase in performance is lower than the increase in revenue. However, the company's specialty polymer materials sector performed quite well. In the first half of the year, it achieved operating income of 220 million yuan (+85.90%), accounting for 4.86 pct to 29.05% of total revenue, and gross margin rose 1.63 pct to 26.12% against the market. On the one hand, sales of LCP materials grew rapidly, with sales of 2,300 tons in the first half of the year, exceeding the sales level for the full year of 2020; on the other hand, the company's sales of fluoropolymer materials were high. The Deqing Science Festival achieved benefits of 10.7567 million yuan in the first half of the year, compared to 6.5009 million yuan in the same period last year. With the easing of pressure on raw material prices and the continued release of the company's specialty polymer materials, the company's profitability is expected to improve in the second half of the year.
The company plans to invest 20,000 tons of LCP to become a global leader.
LCP materials for 5G are high-end and have broad application scenarios. The company grasped import substitution opportunities and developed jointly with customers. The products were fully recognized by customers in the downstream communications and consumer electronics, automotive electronics, electrical and other industries, and the company's LCP material orders grew rapidly. In order to better meet customer needs, the company plans to invest 300 million yuan in Chongqing Changshou to build an LCP resin material project with an annual output of 20,000 tons. The construction period starts in April 2021 and is scheduled to be put into operation in June 2022 (proposed). After the project is completed and the company's current LCP material production capacity is calculated, the company will have the capacity to produce 25,000 tons of LCP resin per year, which can enable the company to produce 35,000 tons of LCP composites per year and meet the resin material needs of customers in the downstream film industry. The company's competitiveness is expected to continue to improve.
Chongqing special materials projects have been implemented one after another to help the company improve its special polymer platform.
The rapid development of industries such as 5G, semiconductors, automotive electronics, and military and aerospace is driving demand for special engineering resins such as PPA and polysulfone. Based on the company's focus on industrial development and import substitution, the fixed increase construction includes projects such as Chongqing Changshou 10,000 tons/year of high-performance polysulfone and 10,000 tons/year of high-performance polysulfone (phase 2). According to the announcement, the first phase of the PPA project was officially put into operation in August, and has entered the batch supply stage through the testing and verification work of downstream automotive electronic relays and other customers; polysulfone and polysulfone and polyarylketone projects are also expected to be put into operation inland this year. The company will use Chongqing's location advantage to achieve an industrial layout in South China, East China and Southwest China. At the same time, the project products will collaborate with the company's existing special engineering polymer materials to achieve import substitution and enhance the company's competitiveness. In addition, the company announced new foreign investment on March 20. It plans to invest 525 million yuan to build high-performance new materials, semiconductors, and 5G communication equipment projects with an annual output of 10,000 tons in Huzhou. This investment is expected to help the company expand downstream industrial chain, meet the product needs of existing and new customers, and enhance the competitiveness of the fluorine-containing materials market.
Investment advice: Buy an -A investment rating. We expect the company's net profit from 2021 to 2023 to be 1003, 177, and 310 million yuan respectively.
Risk warning: certification and promotion of new materials fell short of expectations; project investment fell short of expectations; demand and prices for traditional products declined.