Brief performance review

Wansheng Co., Ltd. released its report for the third quarter of 2021 on October 29, 2021. The company achieved revenue of 3,068 billion yuan in the first three quarters of 2021, an increase of 97.80% over the previous year, and net profit of 625 million yuan to the mother, an increase of 171.41% over the previous year, after deducting net profit of 618 million yuan from non-return mothers, an increase of 183.09% over the previous year. Among them, the third quarter achieved revenue of 1,077 million yuan in a single quarter, an increase of 61.54% over the previous year, net profit of 195 million yuan, an increase of 58.17% over the previous year, net profit of 193 million yuan after deducting non-return mother's net profit of 193 million yuan, an increase of 65.65% over the previous year.

Management analysis

The volume and price of phosphorus-based flame retardants increased sharply year on year, and the company's profit continued to grow. The company is the world's leading manufacturer of functional fine chemicals (organophosphorus flame retardants, special fatty amines, electronic chemicals, paint additives and catalysts, etc.), and has now become the world's leading producer of organophosphorus (halogen-free) flame retardants.

According to operating data disclosed by the company, the average sales price of organophosphate flame retardants in the first three quarters of 2021 was 25,198.05 yuan/ton, up 42.62% year on year. Sales volume was 97,878 tons, up 45.79% year on year. The volume and price of the main products rose sharply, driving the company's performance growth.

The Shandong project continues to advance, the main business continues to expand, and more products are blossoming. The company's Shandong project EIA report was officially accepted by the Weifang Municipal Bureau of Ecology and Environment on October 11, 2021. According to the company's EIA data, the project plans to build a production capacity of 70,000 tons of phosphorus-based polyurethane flame retardants and 50,000 tons of phosphorus-based engineering plastics flame retardants (all BDP), totaling 120,000 tons. The Wansheng Dawei Phase II technical improvement project is also progressing steadily. It is expected to enter the trial production stage in the fourth quarter.

Investment advice

We are optimistic about flame retardant growth opportunities driven by sales of new energy vehicles. We expect the company's net profit for 2021-2023 to be 8.6/11.2/1.45 billion yuan, corresponding to EPS of 1.77/2.0/2.6 yuan, giving the company 20 times PE's net profit in 2022, with a target price of 40 yuan, giving it a “buy” rating.

Risk warning

1. Global NEV growth fell short of expectations 2. Project approval and construction progress fell short of expectations 3. The risk of dilution of non-public offerings 4. Risk of shareholders' and executives' holdings reduction 5. The risk of dual control of energy consumption affecting operating rates