Incident: The industrial investment fund jointly initiated by the company and China Aviation Nanshan - Gongqingcheng China Aviation Digital No. 1 has completed industrial and commercial registration.
Core competitiveness: customer resources+project experience+first-mover advantage+flexible production, building a leader in the plasticizing industry can be expected. 1) Channel advantages and customer resources: Upstream raw materials and downstream brands are world-renowned enterprises; 2) Project experience and industry understanding: can provide customized solutions for different segments; 3) First-mover entry into market segments: dig deeper into downstream customer pain points and choose to intervene in the early stages of project development; 4) Inventory management and flexible production: from order acquisition to product listing to improve the overall efficiency of the supply chain; the company's core competitive advantages are highlighted, and it is possible to build a leader in the plasticizing industry.
Plastic sheets and bars for fund-raising projects: the jewel in the crown of engineering plastics, strives to become a leader in the segment in 3-5 years. 1) Market space: Due to their advantages of wear resistance, vibration resistance, corrosion resistance, recyclability, and high strength, plastic sheet bar products are widely used in automobiles, home appliances, consumer electronics, construction units, etc. In 2019, the total sales revenue of plastic sheets and bars in the Chinese market was 330 billion yuan. Compared with developed countries in Europe and the US, the domestic market competition pattern is scattered. The six leading enterprises accounted for only 0.35% of the market share of revenue in 2019. 2) Development trends: At the policy level, key policies to support the development of the materials industry continue to be implemented; consumption upgrades, lightweight automobiles, new energy vehicles, and home appliances use plastic instead of steel to accelerate the promotion of plate and bar products; import substitution, technological progress, and transformation and upgrading create opportunities for domestic enterprise development, so multiple favorable factors catalyze and enhance industry prosperity. 3) Company goal: After the completion of the fundraising project, the monthly production capacity will exceed 1,500 tons, which is 300% of the production capacity before the fundraising project. By introducing automated and intelligent special engineering plastic extrusion and bar production equipment to build high-quality and intelligent production lines and production workshops, the company strives to become a leading enterprise in the domestic sheet bar field within 3-5 years.
Modified engineering plastics for fund-raising projects: Product formulation is a core barrier, and the company has project experience and R&D advantages. Plastic material modification uses general, engineering or special engineering plastics as the main raw material, and various organic and inorganic fillers and functional additives as auxiliary materials. Through technical means such as filling, toughening, strengthening, blending, and alloying, etc., the properties of the original plastics are improved to meet the needs of different application fields. Due to their customized characteristics, the formulations of various high-performance and professional modified plastics are controlled by leading companies in the segment. As a material supply chain solution service provider, in the process of being deeply involved in the industry for 20 years, the company has accumulated a deep understanding of the industry and various core material formulations, which can ensure product quality, reduce comprehensive costs, provide full-process technical services, and strengthen inventory management. After the engineering plastics modification project and R&D center funded by the company are completed, the transformation from material application development to basic material formulation development will be realized. It will independently own spray-free, 5G materials, lightweight materials, wear-resistant materials, and biomaterial formulation systems; at the same time, it will build a scientific injection+injection molding industry 4.0 application development center to reduce industrial chain costs.
Profit forecast and investment rating: We expect the company's net profit to be 0.64, 1.24, and 2.10 yuan respectively from 2021-2023, and PE to be 75, 39, and 23 times, respectively. We are optimistic about China's plate and bar market. As an industry leader, the company maintains a “buy” rating.
Risk warning: Market demand falls short of expectations; risk of insufficient supply of raw materials and price increases; easing of trade friction between China and the US falls short of expected risk