Investment logic
The world's leading manufacturer of functional fine chemicals (organophosphorus flame retardants, special aliphatic amines, electronic chemicals, paint auxiliaries and catalysts, etc.) has become the leading leader of organophosphorus (halogen-free) flame retardants in the world. in the "double carbon" chemical project approval environment, its capacity advantage under construction has a strong scarcity, a strong certainty of sustainable growth.
The three major driving forces for high demand are ready: the rapid increase in the permeability of new energy vehicles & the new EU environmental protection regulations & 5G new infrastructure increases the demand for engineering plastic flame retardants continues to grow much faster than expected: according to our calculations, according to the assumption that the total sales of new energy vehicles in China, the United States and Europe will reach 16.75 million in 2025, organophosphorus engineering plastic flame retardants will be used in the power components of new energy vehicles. The cumulative new demand for charging pile components over the past five years will exceed 74000 tons. EU environmental regulations superimposed by 5G infrastructure will increase demand by no less than 38500 tons and no less than 112500 tons.
The limited production capacity on the supply side is severe, and the continuous rise in quantity and price of flame retardants has strong certainty: the current effective production capacity of the industry is less than 200000 tons, and the new capacity is not only subject to strict examination and approval, but also faces the risk of shutting down the stock of old capacity. At the same time, yellow phosphorus and some production capacity in Jiangsu are affected by the "double control" policy, the start-up load rate may decline, raw materials are tightened and industrial output is reduced or product prices are pushed up. The company continues to promote Linhai technical transformation and Shandong project, under the assumption of no price increase, it is expected to contribute 260 million yuan and 340 million yuan in 2022-2023 performance increment, the company's main business growth certainty.
The advantage of quality barrier: after more than 20 years of development, the company has been in the leading position in the domestic industry together with Jacques Technology (002409 SZ) for a long time, but the production capacity of Jacques Technology has been shut down continuously after the impact of the Xiangshui incident, and has gradually lost the leading position of flame retardants. At present, the leading advantage of the company in the industry is obvious. at present, the application scenarios of the company's main products include automobiles, 3C electronic products, etc., with strict certification, high quality requirements from automobile enterprises and 3C electronic enterprises, and a long certification cycle. it often takes 1-3 years to get downstream certification, and the new production capacity enters slowly.
Investment suggestion
We are optimistic about the growth opportunities of flame retardants driven by the sales of new energy vehicles. It is estimated that the company's net profit in 2021-2023 will be 8.6 PE 1.42 billion yuan, corresponding to EPS1.77/2.0/2.6 yuan, which will give the company 20 times the net profit in 2022, with a target price of 40 yuan, and a "buy" rating.
Risk hint
1. The global growth of new energy vehicles is less than expected. Project approval and construction schedule is not as expected 3, dilution risk of non-public offering 4, reduction risk of shareholders and executives 5, risk of double control of energy consumption on operating rate
