Runyang Technology is one of the leading IXPE production enterprises in the domestic industry, specializing in the R & D, production and sales of non-toxic and environmentally friendly polymer foams, and its main products are electronic crosslinked irradiated polyethylene (IXPE).
1) from 2017 to 2020, the compound growth rate of IXPE output reached 46.29%, and the annual IXPE production capacity reached 133.25 million square meters at the end of 20 years. 2) the project under construction "IXPE Automation Technical renovation Project with an annual output of 16 million square meters" is expected to be put into production in 2022; the "annual production capacity of 100 million square meters IXPE expansion project" is expected to be put into production in 2022. In 2023, the production capacity of Q3 will be 70% release in 2024. After full production, the company's IPEX capacity will reach 249.25 million square meters. 3) due to the impact of the COVID-19 epidemic since the end of 2019, the company's Q1 resumption rate in 2020 is insufficient, and we believe that the operating rate is expected to increase when the epidemic improves.
The downstream demand of multi-series IXPE is growing, and the expansion of business areas supports future development. 1) Popularization and antibacterial enhancement series IXPE are used as silent pad materials in PVC plastic flooring industry, which are mainly exported to Europe and the United States and other international markets. According to the company's annual report (2020) citing data from the United Nations trade in goods database, China's PVC flooring exports increased from US $557 million to US $4.995 billion in 2009-2019, with an average annual compound growth rate of 24.53%. Affected by the 2015 "toxic floor" incident, American consumers pay more attention to the environmental performance of the floor, while the domestic PVC floor industry started relatively late, and consumers' acceptance of PVC floor is relatively low. We believe that the increase in permeability in the future is expected to release domestic market demand. 2) Special series IXPE is used in automobile interior decoration industry as sound insulation, flame retardant, heat insulation and shock absorption materials. According to the company's annual report (2020) citing data from the International Association of Automobile Manufacturers, global car production increased from 47.7726 million to 67.1492 million in 2009-2019, and passenger car production in China increased from 10.3838 million to 21.3602 million. 3) the company cooperates with the well-known brand "Keyoubi" of baby products to produce high-grade green baby activity protection pads (climbing pads) with the newly developed high rebound series GFOAM as the inner tank material, which we believe will form a new support for the company's business development.
The company's technical advantages and quality advantages establish the advantage of customer resources. 1) by the end of 2020, the company has a total of 86 patented technologies (including 32 invention patents and 2 overseas patents). The main IXPE products have passed the formaldehyde, VOC and other harmful substance tests of Intertek, one of the largest consumer goods testing, inspection and certification companies in the world. 2) the company independently developed RY-2400 high-speed foaming furnace, and the production capacity of this equipment is more than 3 times higher than that of traditional equipment. 3) IXPE products have entered the Home Depot supply system of the household building materials retailer through downstream customers, and entered the supply chain system of domestic automobile machine manufacturers through Volvo first-level spare parts suppliers, and the product quality and performance have been verified by large manufacturers for a long time.
Profit forecast and investment rating. We estimate that the 21-23 year net profit of Runyang Science and Technology is 5.20,7.12 and 1.003 billion yuan respectively, and the corresponding EPS is 1.12,1.76,2.39 yuan respectively. On the whole, we give Runyang Technology 28-30 times PE valuation range in 2022, and the corresponding reasonable value range is 49.28-52.80 yuan. For the first time, it is given an investment rating of "better than the market".
Risk hint. The progress in the construction of production capacity is not as expected; the macroeconomic downturn; product prices fluctuate greatly.