Main points of investment:
The company is the first company in China to achieve continuous production of water treatment pharmaceuticals, the 2021Q4 industry pattern has significantly improved, and the profitability of water treatment pharmaceutical business has been greatly improved. At the same time, the company is involved in chlor-alkali business, we believe that the company on the one hand vertical integration tamping cost advantage, on the other hand to expand to the field of lithium materials, open up the company's growth space.
Taihe Science and Technology is an industrial circulating water treatment pharmaceutical head manufacturer company located in Zaozhuang, Shandong Province, the products mainly include phosphorus series and polymer water treatment agents, the first in China to use tubular reactors to achieve continuous production of major products, is the domestic pharmaceutical leader, we estimate that the company in 2021 in the domestic circulating water treatment pharmaceutical market share of about 8.3%. The market scale of water treatment pharmaceuticals is gradually expanding, and the current industry pattern is improving. Considering the advantages of environmental protection and financing in the future, the share of Longtou City will be further increased.
The by-product of chlor-alkali project is liquid chlorine, which has the potential of upward integration.
The company plans to lease and operate Zhongke Chemical's annual chlor-alkali project assets with an annual output of 300000 tons and a by-product of 250000 tons of liquid chlorine. The project is located in the park where the water treatment chemicals are located. Liquid chlorine is highly toxic and is the upstream raw material of phosphorus trichloride, an important raw material of the company. with the gradual tightening of policy and the increase of chlorine cost, the company can realize pipeline transportation in the park and has the potential to make up the upstream phosphorus trichloride with low cost in the future.
Li-ion material business is expected to grow into the second growth pole
The rapid development of new energy vehicles has led to a rapid increase in demand for lithium materials, and the company has cut into the lithium materials business. Lithium iron phosphate and vinyl carbonate (VC) projects are currently under construction and are expected to be put into production in the fourth quarter of 2022. It is worth noting that liquid chlorine, a by-product of chlor-alkali project, is the raw material of many lithium materials such as VC, and the company has the basis to set foot in other lithium materials.
Profit forecast, valuation and investment rating
We estimate that the 2022-24 return net profit of the company is 390 million yuan, 620 million yuan and 750 million yuan respectively, the corresponding EPS is 1.8,2.9 yuan and 3.50 yuan respectively, and the current share price corresponding PE is 12x, 7x and 6x respectively.
According to the FCFF valuation model, the company's target price in 2022 is 29.79. in view of the continuous improvement in the company's main business pattern, new energy materials open room for growth, cover for the first time, and give a "buy" rating.
Risk hint
The risk that the business expansion of lithium materials is not as expected; the risk of chlor-alkali project operation is not as expected.
