Focus on chlor-alkali products, performance ushered in a reversal. In 2021, the company's existing product capacity: caustic soda 720,000 tons / year, dichloroethane 720,000 tons / year, liquid chlorine 600,000 tons / year, special polyvinyl chloride resin 90,000 tons / year, vinyl chloride 200,000 tons / year. Deep ploughing chlor-alkali chemical industry for many years, the company's industrial chain has been extended from traditional chlor-alkali products to downstream PVC resin, MDI and so on. In 2021, the company achieved a net profit of 1.77 billion yuan, an increase of 192% over the same period last year, and its performance reversed to a five-year high.
The supply and demand of caustic soda is tight, and the price is expected to rise. In terms of production capacity, affected by supply-side reform and double control of energy consumption, the new production capacity of domestic caustic soda is limited in the next 1-2 years. In 2021, domestic caustic soda production capacity was originally planned to increase by 1.11 million tons, but actually increased by 350000 tons, achieving only 31.53%. On the demand side, the rapid growth of downstream alumina production capacity led to the growth of demand for caustic soda. At the same time, the price difference between downstream electrolytic aluminum and alumina is increasing, and there is still room for the upward price of alumina. The prices of caustic soda and alumina are highly synchronized, so with the rising price of electrolytic aluminum, the price of caustic soda is expected to rise. In terms of inventory, as of April 8, 2022, the inventory of the tablet alkali plant was 22600 tons, a decrease of 93.4% compared with the same period in 2020, and was at a historically low level. Inventories are lower, supporting prices up. As of April 13, 2022, the average prices of liquid caustic soda and solid caustic soda in the domestic market were 1296 yuan / ton and 4074 yuan / ton, respectively, up 88.0% and 131.5% from the same period last year, both in the upstream channel.
The production capacity of dichloroethane is stable and the price center moves up. Domestic dichloroethane production capacity is stable, the industry concentration is high. At present, among the three major production enterprises, the company's production capacity accounts for 44.4%, ranking first. Since 2020, the domestic price of dichloroethane has risen sharply, and the center has moved up. As of April 13, 2022, the domestic price of dichloroethane was still high, rising by about 111.7% compared with the same period last year.
New production capacity continues to be put into use, and profitability is expected to be further improved. In 2021, the transformation project of 200,000 tons of vinyl chloride and 60,000 tons of special polyvinyl chloride was successfully put into production. In 2022, the company added 300,000 tons of caustic soda and 400,000 tons of PVC in Qinzhou, Guangxi, and is expected to be put into production before the end of the year. The commissioning of new projects in the future will open up room for performance growth for the company, and the company's profitability is expected to be further improved.
Investment suggestion
Combined with the company's new production capacity projects under construction and the prosperity of the main business industry, it is expected that the company's operating income will be 75.70 million yuan, respectively, and the return net profit will be 20.47 billion yuan, 30.39 billion yuan, 3.519 billion yuan, respectively, and the corresponding EPS will be 1.77 yuan, 2.63max, 3.04 yuan respectively. Taking the closing price on April 13, 2022 as the benchmark, the corresponding PE is expected to be 7.64, 5.15 and 4.45 times, respectively. We are optimistic about the company's development prospects, covering it for the first time and giving it a "highly recommended" rating.
Risk hint
The price of caustic soda fluctuates abnormally, the domestic epidemic situation is repeated, the production of the company's project is blocked, and so on.