Summary of the report:
BDO industry chain has become the focus of development: besides BASF, the company is the first enterprise in China with two production processes of Reppe and maleic anhydride, with strong technical advantages. BDO is the main profit point of the company and will become the focus of the company's business development in the future. The completion of the crude benzene refining project expands the industrial chain and further supports the profitability of BDO business. Driven by the capacity expansion of PTMEG and PBT over the next five years, it is conservatively estimated that BDO demand growth will remain above 20 per cent. In 2011, we ushered in the inflection point of BDO performance, showing a situation of rising volume and price.
Benefit from spandex production expansion, 2011 PTMEG volume and price increase: PTMEG is an important raw material for spandex, 2011 spandex new production capacity of 112000 tons, and strong demand, the operating rate is supported by the textile industry boom, PTMEG market is facing a supply and demand gap of 57000 tons, while Shanxi 3D this year has 30, 000 tons of new PTMEG production capacity. At present, the company's PTMEG is in short supply, and the price continues to rise. Calcium carbide, which rose sharply last year due to energy conservation and emission reduction prices, has been falling this year, easing the pressure on the company's raw materials and widening interest rate spreads.
With the help of automobiles, electronics and PBT to boost the medium-and long-term performance of BDO: maleic anhydride BDO is driven by the downstream PBT boom, and the demand is guaranteed. As one of the most potential engineering plastics, PBT is widely used in automotive and electronic fields, and the demand growth rate is expected to be more than 25% in the next three years. At present, driven by the rapid demand for downstream cars, home appliances and building materials, domestic PBT is in short supply, and PBT prices have shown an upward trend since last year. Although domestic production capacity has expanded rapidly in recent years, the operating rate is only about 40%, while the degree of import dependence is as high as 60% in 2009. The most important reason is that Chinese PBT manufacturers do not have matching BDO production equipment and encounter raw material bottlenecks. We judge that the company's maleic anhydride BDO will alleviate this situation after it is put into production.
The company's hydrogen bottleneck is gradually being solved: insufficient coke oven gas supply is the biggest problem troubling the industry at present. The holding subsidiary Sanwei Ryder has completed the construction of a coking project of 1.2 million tons per year, and the coke oven gas produced will support half of the company's hydrogen supply. The company has built 8400m3/h methanol cracking hydrogen production equipment, which can reduce the external dependence of hydrogen to less than 30%.
Maintain buy-A rating: the company is entering a business cycle, new capacity has been released one after another, and will enjoy a favorable situation of rising volume and price in the next few years. Although the production progress of the company's new project is lower than expected, the prosperity of the product is higher than expected. We keep our 2011 EPS0.7 profit forecast unchanged, raising 2012 EPS to 0.98 yuan. Give 2012 20 times the monthly target price of PE,12 20 yuan.
Risk tips: insufficient supply of coke oven gas; product prices fall.