Incident: The company released its 2022H1 semi-annual report. 2021H1 achieved operating income of 793 million yuan (YoY +51%); realized net profit of 55.57 million yuan (YoY +22%); and basic earnings per share of 0.28 yuan (YoY +22%). Among them, the company achieved revenue of 402 million yuan (YoY +59.01%) in a single quarter; net profit of 32.96 million yuan (YoY +42.88%) in a single quarter; performance was in line with expectations.
New application areas were gradually expanded, and revenue increased significantly in the first half of the year. The company continues to position itself in a differentiated, mid-range and high-end market. At present, it has entered the two major emerging application fields of invisible car clothing and high-end shoe materials, gradually breaking the monopoly of leading overseas manufacturers in this field and forming a domestic replacement. 2022H1 Due to high prices of upstream raw materials and strong downstream demand, the company adjusted the sales prices of TPU products in due course to achieve rapid revenue growth driven by a sharp rise in volume and price. At the same time, the company is also actively developing new products, seeking cooperation opportunities in new energy, medical care and personal care, and continuously focusing on future growth.
Prices of raw materials have declined, and it is expected that the cost pressure will gradually ease in the second half of the year. 2021H1 achieved a comprehensive gross profit margin of 13.64%, down 2.14 pct from the same period last year, mainly due to the fact that the prices of some TPU raw materials remained high in the first half of the year and the time required for the company's own preparation cycle to digest inventory; it achieved a gross profit margin of 14.72% in a single quarter in the second quarter (YOY-0.76pct, QoQ+2.19pct), which has been repaired month-on-month. According to Baichuan data, the average price of the 2022H1 pure MDI (barrel) /BDO market in East China fell 6.6%/51% year on year compared to 2021 H1, 7.1%/56% month on month compared to 2021 H2, and 2022Q2 fell 5.6%/14.5% month on month compared to Q1, respectively. We expect that the relief of raw material pressure will be reflected in performance in the second half of the year, and profitability will be repaired.
The new TPU production capacity was built in an orderly manner, and the Henan New Materials Industrial Park received approval for construction. The 2022H1 elastomer project with an annual output of 200,000 tons and the polyurethane new materials industrial park project are being built in an orderly manner. Projects under construction have been added by 3556/5.74 million yuan, respectively, and the project progress has reached 20%/1%. Among them, the first phase of the 200,000 tons/year elastomer project with a production capacity of 100,000 tons is expected to be completed and put into operation by the end of this year or the beginning of next year, and the company's traditional TPU business is expected to maintain steady growth; the new materials industrial park project has received EIA, energy evaluation and safety evaluation, and has obtained a “Construction Project Planning Permit”. Construction can commence when the relevant formalities are completed. The current market price of HDI is 68,000 yuan/ton, the cost is about 35,000 yuan/ton, and the profitability is high. The construction cycle is 18 months. After production is put into operation, on the one hand, it can solve the self-supply of its own raw materials and reduce production costs, and on the other hand, external sales increase the company's performance.
Investment analysis opinions: Maintain profit forecasts and maintain buying ratings. We expect to achieve revenue of 1,901/24.11/4.23 billion yuan in 2022-2024; net profit of 149/2.01/512 million yuan, corresponding to PE 38/28/11X. The company is the first manufacturer to break through high-end TPU particle technology. Short-term cost pressure has been relieved, the two major middle and high-end fields of footwear and car clothing have gradually entered the release period. TPU business performance is highly certain, and the long-term layout of upstream raw materials, specialty isocyanates, is expected to greatly increase the company's performance after production is put into operation and maintain a “buy” rating.
Risk warning: raw material prices fluctuate, demand in new downstream markets falls short of expectations, and new business development falls short of expectations.