The company is mainly engaged in chlor-alkali products. The company mainly produces and sells caustic soda, chlorine and chlorine products, as well as PVC plastic resins and products. At present, the annual production capacity of the company's main products is 720000 tons, liquid chlorine 650000 tons, dichloroethane 720000 tons, paste PVC resin 60, 000 tons, special PVC resin 20, 000 tons, chlorinated PVC resin 10, 000 tons. Affected by macroeconomic and industrial overcapacity and other factors, the market continued to be depressed in 2015. In 2015, the company realized revenue of 6.17 billion yuan, down 12.04% from the same period last year, and achieved a net profit of 95.615 million yuan. 2016Q1 realized revenue of 1.12 billion yuan, down 27.21% from the same period last year, and its net profit was 9.426 million yuan, an increase of 132.28% over the same period last year.

The supply of paste resin shrank and the price of products rose sharply. The company's paste resin production mainly has two production processes: mixing method and seed emulsion method, which are widely used in paint industry, building materials industry, medical industry and other fields, mainly used in artificial leather, floor leather, wallpaper, toys and bottle caps and other products. Since February 2016, the demand side: after the Spring Festival, the domestic market demand for PVC paste resin improved; supply side: several large PVC paste resin production enterprises did not start due to various reasons, Tianjin Botian Chemical parking relocation has brought strong support to the rise in the price of PVC paste resin, PVC paste resin market prices rose from 6700 yuan / ton at the beginning of the year to 8400 yuan / ton, an increase of 26%. At present, the operating rate of the company's 60,000-ton paste resin plant is 7-80%, benefiting from the rise in product prices.

Win-win cooperation with the upper and lower reaches of the industrial chain to create a circular economy. In Shanghai Chemical Industrial Park, the company cooperates with international chemical giants such as BASF, Bayer, Huntsman, Kestron and other international chemical giants to provide raw material chlorine and caustic soda for MDI/TDI/PC and other devices in the park, and to use ethylene raw material, secondary chlorine, digest by-product hydrogen chloride, and produce dichloroethane, and raw material chlorine and caustic soda are supplied through pipelines, which ensures the stability and security of supply and saves logistics costs.

Huayi Group's core assets are listed as a whole, and the company optimizes the industrial layout. Huayi Group, the company's controlling shareholder, carried out restructuring and integration in 2015, injecting the group's core high-quality assets into Shuangqian shares (now referred to as "Huayi Group"). The other two listed entities of the group are chlor-alkali chemical industry and Sanaifu. On May 10, 2016, Sanaifu announced the implementation of major asset restructuring, and chlor-alkali chemical industry also made efforts to optimize the industrial layout. The company has decided to take the Shanghai Chemical Zone as the main battlefield for its development. In the past three years, it has implemented the outage of PVC in wujing base, the transfer of 90% equity in Dakai, 44% equity in Tiantan, and the transfer of assets such as structures on the idling ground of the group company. The company focuses on long-term development, actively adjusts and improves the industrial layout, enriches the product structure, and actively develops chlorine-containing fine chemicals and vinyl materials. Seize the market share of high-end chemical and fine chemical products, and enhance the overall profitability of the company.

Profit forecast and investment advice. In the case of rising price of PVC paste resin and stable supply of chlor-alkali to customers downstream of the park in 2016, the net profit of the company belonging to the parent company from 2016 to 2018 is expected to be 1.64x1.82 / 254 million yuan, an increase of 71.21%, 11.19% and 39.30% respectively over the same period last year. The corresponding EPS is 0.14 shock 0.16 0.22 yuan respectively. In view of the fact that most of the listed companies in the chlor-alkali industry are in a state of loss, they can not give a reasonable relative valuation, and the company's price-to-book ratio is slightly higher than the average level of the same industry, so the rating is not given for the time being.

Risk hint: the risk of continuous decline in the price of main products and the risk of substantial changes in raw material costs.