Main points of investment:

Under the general trend of energy saving and emission reduction, tire labeling and automobile electrification drive the high prosperity of green tires and open up the growth space of highly dispersed silica. As the third largest manufacturer in the world, the company benefits from the increase in the permeability of highly dispersed silica.

For the global leading manufacturers of highly dispersed silica for green tires, the company has confirmed that the share product market is mainly used as special materials for high-performance meridian green tires in the rubber industry. it has formed a complete industrial chain from raw material sulfuric acid, sodium silicate to final product silica.

The company now has a production capacity of 330000 tons of precipitated silica, ranking first in Asia and third in the world.

With the steady development of green tires, the CAGR corresponding to the demand for highly dispersed silicon dioxide in the next three years will be 32%. Under the background of "double carbon", green tires with highly dispersed silicon dioxide can effectively reduce rolling resistance and energy consumption, which is an economical and effective means of energy saving and emission reduction. According to our estimates, the penetration of green tires in the replacement market will increase, driving the global demand for highly dispersed silica to 1.64 million tons in 2025, and CAGR32.6% in three years. With the improvement of the electric rate of cars in the supporting market, the demand for highly dispersed silica is expected to reach 360000 tons in 2025. In three years, CAGR31%, will only consider the above estimates for passenger car tires, and the overall global demand for highly dispersed silica will reach 2 million tons, with a CAGR of 32%.

The company's highly dispersed silicon dioxide capacity continues to expand, and profitability is expected to increase marginally. The company is building production capacity of 75000 tons, and the proposed second phase capacity in Thailand is 25000 tons, all of which are high value-added silicon dioxide products. With the landing of future projects, on the one hand, the proportion of highly dispersed silicon dioxide production capacity will further increase, on the other hand, economies of scale will appear, marginal costs will decline, and the company's profitability is expected to continue to improve.

Earnings forecast, valuation and rating

We estimate that the company's income in 2022-24 will be 18.8 pound 23.1 / 2.57 billion yuan, the corresponding growth rate will be 25.3%, 22.7%, 11.3%, and the net profit will be 4.16, 5.13 / 598 million yuan, respectively. The corresponding growth rate will be 38.7%, 23.3%, 16.5%, 16.5%, 1.00 and 1.2343 yuan per share, respectively, and the 3-year CAGR will be 26%. Considering the good prospect of green tires in the future and the continuous release of the company's highly dispersed silicon dioxide production capacity, with reference to the comparable company's valuation, we give the company 21 times PE in 23 years, with a target price of 25.83 yuan, with a "buy" rating for the first time.

Risk tips: lower than expected risk of construction / proposed projects, risk of fluctuation of major raw materials and energy prices, risk of fluctuation of foreign exchange rate, risk of less than expected customer development, risk limited by environmental protection policy.