Event: on November 18, 2022, the first carbonization line of the company's 12000-ton carbon fiber composite project was successfully driven. The carbonization line was one of the company's non-public offering projects in 2021. It is also the first paved carbon fiber production line with the largest independent design and installation capacity. Through the upgrading of the equipment, the annual output can reach more than 3000 tons, which further prolongs the production cycle, improves the safety and stability, and improves the product quality.

Global viscose filament faucet, both viscose staple fiber production capacity. The global viscose filament production capacity is about 280,000 tons / year, mainly concentrated in China, of which the company has 80,000 tons / year viscose filament production capacity, accounting for about 29% of the world. Viscose filament is also the main source of profits for the company, 2022H1, which accounts for 66% of revenue, and as a high-end fiber variety, the price of viscose filament has been rising since 2021, and profitability has remained relatively stable in the face of weak demand. At the same time, the company has a production capacity of 120,000 tons of viscose staple fiber per year, which is not among the best in China, but it effectively complements the deficiency of the company's viscose fiber products, and cooperation with viscose filaments is conducive to expanding overall sales.

The carbon fiber industry has a broad space for development. According to the 2021 Global carbon Fiber Composites Market report, the global demand for carbon fiber in 2021 is about 118000 tons, an increase of 10.4 percent over the same period last year. In terms of quality requirements, the first three major applications are wind power blades, aerospace, sports and leisure. In the next decade, thanks to the rapid development of wind energy, hydrogen energy, photovoltaic and other industries, the demand for carbon fiber is expected to continue to grow, which is expected to reach 200000 tons in 2025 and 400000 tons in 2030, with an average annual compound growth rate of about 15%. In particular, wind power blades will be the main engine driving the demand for carbon fiber. similarly, according to Theo's 2021 Global carbon Fiber Composites Market report, the carbon fiber demand for wind power blades will increase from 33000 tons in 2021 to 80600 tons in 2025, with an average annual compound growth rate of 25 per cent.

Backed by Jilin Chemical Fiber Group, it is expected to develop into a domestic carbon fiber leader in the future. In January 2021, Jilin Chemical Fiber Group announced that it would complete the grand plan of 200000 tons of precursor filament, 60,000 tons of carbon fiber and 10,000 tons of composite materials during the 14th five-year Plan period. As an important participant, the company is expected to join hands with Jilin carbon Valley to create a domestic carbon fiber "precursor-carbon filament-composite" integrated industrial cluster and open a new chapter in development. Jilin Cameike, a wholly owned subsidiary of the company, has a production capacity of 600 tons / year of 1K and 3K small tow carbon fiber. The second production line has been successfully started in June 2022 and has been fully produced. Jilin Baoyi, which is 49% owned by the company, is mainly engaged in the research, development, production and sales of large tow and low-cost carbon fiber. At the same time, the company uses the non-public offering fundraising project to produce 12000 tons of carbon fiber composite board per year, and the first carbonization line was successfully driven on November 19, 2022, which further extends to the field of carbon fiber composite materials. In addition, Jilin Guoxing carbon fiber (100% owned by Jilin Chemical Fiber Group) is mainly engaged in the production of large tow carbon fiber, which is expected to be injected into listed companies in the future to help the company become bigger and stronger in the field of carbon fiber.

Investment suggestion: we expect the company's net profit from 2022 to 2024 to be 0.4 million 2.2 EPS 0.14 million RMB, and the corresponding PE 0.14 times that of 280-56-38. Considering that the company is the leader of global viscose filament, as the global economic recovery demand improves, profitability is expected to increase. At the same time, the company actively distributes the fields of large tow, small tow carbon fiber and carbon fiber composite materials, and is in the process of putting into production one after another, with strong certainty, broad growth space, covering for the first time and giving "overweight" rating.

Risk hint: the price of the product has fallen sharply and the progress of the new project is not as expected.