Introduction to this report:

The company's PVP and Orez products have significant advantages over foreign competitors. High-end customers continued to break through during the window period, and along with the gradual release of 20,000 tons of NVP/PVP production capacity, it became a global leader.

Key points of investment:

The first coverage gave an “increase in holdings” rating. Due to the gradual release of the company's new production capacity, the penetration rate of the high-end market has increased. We expect the EPS for 2022-2024 to be 0.96/2.85/4.08 yuan respectively, an increase of 6%/197%/43% over the previous year, and the target price is 36.84 yuan (corresponding to PE in 2023 is 12.93 times). The current space is 45.67%, giving an “increase in holdings” rating.

As a powerful additive, PVP (polyvinylpyrrolidone) is widely used in the fields of medicine, daily necessities, food, industry, semiconductors and new energy. Industry barriers are high and customer stickiness is strong. The total global PVP consumption is about 90,000 tons. According to fact data, the market size is about 2.5 billion US dollars, with a compound growth rate of about 7%. The high-end market is mainly dominated by overseas suppliers such as BASF and Ashland.

Having worked in the PVP industry for a long time, continued to upgrade products, seize the window period to enter high-end overseas markets, and become a global leader. The company's product quality has improved markedly in recent years, compounded by force majeure from overseas competitors, won recognition from leading global customers within the window period, and entered high-value overseas markets. After the company's production capacity of 20,000 tons is put into operation in 23 years, it will have a production capacity of 34,000 tons of NVP and PVP, ranking first in the world, leading the cost industry, and growing rapidly with the gradual entry of high-end customers. Furthermore, based on the advantages and technology accumulation of the PVP industry chain, the company developed its own new Oriz brand, upgraded its product matrix, broke foreign monopolies, and reached long-term cooperation with major international customers such as GSK. The products are used in toothpaste, mouthwash, dental care products and other fields, with broad prospects.

After a three-year period of pain in the medical sector, the company strengthened management, and it is expected that the plight will reverse. The company laid out the precision medicine sector through mergers and acquisitions and shareholding, involving reagents, consumables, equipment, drugs and services. Along with the restoration of offline scenarios and the strengthening of company management, the company gradually came out of the haze.

Risk warning: product sales fall short of expectations, capacity expansion falls short of expectations, raw material prices rise