Main viewpoints

1. Societe Generale shares: the status of domestic foundry materials leading enterprises

The company's main cold box resin, self-hardening furan resin and other casting resin binder, widely used in automotive and internal combustion engines, machine tools, power generation, construction machinery, rail and shipping and other fields. The production capacity of self-hardening furan resin is 38,000 tons / year, and that of cold core box resin is 20,000 tons / year, with production and sales ranking second and first in the country, with a domestic market share of 10% and 24% respectively, and a gross profit margin of 25% and 45%, respectively.

two。 Resin binder for casting: the demand is growing steadily, and the high concentration of the industry is expected to improve continuously. The resin binder for casting mainly includes self-hardening furan resin and cold core box resin, among which the domestic annual demand for self-hardening furan resin is about 500000 tons, and the demand growth is relatively stable. From the supply side, at present, the main domestic manufacturers are the company and Shengquan Group, and the others are small-scale low-end manufacturers with low industry concentration (CR2=30%). Foreign competitors include ASK of the United States (formerly a joint venture between the Ashland Group of the United States and Sud-Chemie of Germany, which is now a wholly owned subsidiary of Ashland), Foxco of the United Kingdom (now renamed Vesuvius), Flower King of Japan and HA of Germany.

At present, the industry has basically completed the localization of the middle and low-end fields. In the future, the company will actively expand the process of rich product categories and high-end products, and continue to promote the concentration of the industry.

3. 75000 tons of casting materials fund-raising project: in 2017, the expansion doubled to solve the capacity bottleneck. In recent years, the company's main products, self-hardening furan resin, have been operating at full capacity for a long time, and the existing production capacity has been unable to meet the continuous growth of the company's main business in the future. The company IPO raised 430 million yuan for the annual production of 75000 tons of new chemical materials for foundry (including 40,000 tons / year self-hardening furan resin, 15,000 tons / year cold box resin and 20,000 tons / year sulfonic acid curing agent), etc., and will be completed in the first half of 17 years. After completion, the total production capacity of the company's self-hardening furan resin and cold box resin will reach 78,000 tons / year and 35,000 tons / year respectively, the capacity bottleneck will be removed and meet the development needs of the company in the next three years.

4. Investment advice:

We estimate that the company's EPS will be 0.55,0.68 and 0.96 yuan respectively from 2016 to 2018, corresponding to 54X, 44x and 31x PE, which will be covered for the first time.

5. Risk Tips:

The construction progress of the new project is lower than expected, the rising cost of raw materials and the lag of price adjustment lead to a decline in gross profit.