The net profit reached a new high, the three major businesses grew explosively, and the PVDF was in short supply. The net profit reached a record high, in line with expectations: the company's income in 2021 was 15.844 billion yuan, an increase of 57.75% over the same period last year; gross profit margin rose to about 32.93% from 22.35% in the same period last year. The profit attributable to the owners of the company for the year was 2.075 billion yuan, an increase of 168.78% over the same period last year, slightly lower than our forecast of 2.3 billion, mainly due to the fact that the company charged about 300 million yuan to employees' stock purchase rights under accounting standards. if this effect is excluded, it is basically in line with our expectations.

Three major business explosive growth, the PVDF industry chain is difficult to change in short supply: during the year, the company's three major business sectors of revenue and profit have achieved explosive growth. The revenue of the polymer business was 4.825 billion, up 51% from the same period last year; the operating profit margin was 27.88%, compared with 13.67% in the same period, mainly due to the continuous improvement of the prosperity of new energy vehicles, and the company's core product PVDF was seriously in short supply during the year, resulting in a substantial increase in prices and profits compared with the same period last year. Silicone revenue was 4.184 billion, up 71% from the same period last year; operating profit margin was 30.3%, compared with 11.47% in the same period, mainly due to the fact that the epidemic repeatedly pushed overseas orders to be transferred to domestic production capacity, which also caused supply to fall short of demand. Refrigerant revenue was 3.337 billion, an increase of 62% over the same period last year; operating profit margin was 17.41%, compared with 9.17% in the same period. Among them, R142b is affected by the insufficient supply of downstream PVDF, the product supply is very short, and the sharp rise in prices has driven the segment performance. Judging from the recent operation of the company, although the recent epidemic situation has been repeated, the production and operation of the company has basically remained normal, and the prices of various products have rebounded from the off-season in February to phased highs, with a significant increase over the same period. Among them, lithium grade PVDF products are still maintained at the high level of 430000 / ton, the trend is steady and rising. Looking forward to this year, as a large amount of new capacity in the PVDF industry will not be released until the end of the year at the earliest, there is a great certainty that the supply of PVDF continues to fall short of demand throughout the year, and prices are expected to continue to hit new highs, which will contribute to considerable profit increments. An additional 300000 tons of organosilicon production capacity has been completed and put into production, and the annual production capacity has increased to 600000 tons from 300000 tons last year, and the contribution of revenue and profit is expected to further increase. The production quota of refrigerants such as R142b is locked by the policy, and downstream PVDF is required to expand production, so the possibility of price decline is very small. The company's annual sales of 13000 tons will also provide a huge profit increment, while other refrigerant products are expected to remain stable.

Target price of HK $17.66, buy rating: the company's new 10,000-ton PVDF project will be completed and put into production in the fourth quarter. Together with the company's additional 5000 tons of technical transformation, the total production capacity will reach 25000 tons by the end of the year and 55000 tons in 2025. With the completion of the first and second phase of the PTFE project, the volume will please climb another high-rise building. With the release of new production capacity of various manufacturers next year, we expect that PVDF prices may be loosened, but shipments will still have strong growth. There is a high degree of certainty about the profit contribution from PVDF, R142b and silicone products this year. Based on the expectation of the maintenance of the three core businesses, the high growth of PVDF in the new energy sector and the continuous expansion of new capacity in the future, according to the 2022 earnings forecast, the company will be given an 8 times PE valuation center corresponding to the target price of HK $17.66.