Summary of the report:
Additional issuance is good for the long term: the company announced a non-public offering plan, the total number of shares issued does not exceed 150 million shares, and the issue price is not less than 10.64 yuan per share. Yang Coal Group and Provincial Economic and Trade Group subscribed for the shares in the issue with their 80% and 20% shares in calcium carbide, respectively. The preliminary evaluation value of 100% equity in calcium carbide company is 320 million yuan. The cash raised by the additional issuance will mainly be used for the new 100000 tons / year calcium carbide BDO project, 100000 tons / year maleic anhydride project and 30 000 tons / year PTMEG project. Calcium carbide is expected to start operation by the end of 2011 to ensure that calcium carbide BDO is self-sufficient in raw materials. The completion of the BDO project will enable the company to have a production capacity of 250000 tons / year of BDO, making it the second largest BDO manufacturer in the world. The commissioning of 100000 t / a maleic anhydride production plant will enable the company to open the "coking benzene-maleic anhydride-maleic anhydride BDO" industry chain and solve the problem of maleic anhydride BDO raw materials. The completion of the PTMEG production line will extend the company's industrial chain and enjoy the returns brought by the rapid development of the downstream spandex industry.
BDO industry chain has entered the business cycle: the company is the largest BDO production enterprise in China, and it is also the only enterprise in China that has mastered both calcium carbide and maleic anhydride production processes. With the rapid development of engineering plastics, polyurethane and other downstream industries, there is a high demand for BDO products. The price of BDO has risen from 19000 yuan / ton at the beginning of the year to 25500 yuan / ton at present. PTMEG is the downstream product of BDO. The production capacity of spandex industry expands rapidly, which makes the domestic demand for PTMEG increase rapidly. the price of PTMEG rises from 20000 yuan / ton at the beginning of 2009 to 33000 yuan / ton at present.
Short-term valuation is slightly expensive, downgraded to overweight-A rating: due to the low operating rate of maleic anhydride BDO and rising company costs, this year's profit is lower than we had expected. Based on the diluted share capital of the company after issuing 150 million additional shares next year, we expect the EPS of the company this year and next year to be 0.33 yuan and 0.57 yuan respectively, with a slightly higher short-term valuation. We downgraded to overweight-A, valuing 2012 at 20 times, with a six-month target price of 11.4 yuan.
Risk hints: BDO start-up rate is lower than expected; product prices fall; construction progress of additional issuance projects is slow