Main points of investment
The new thermoplastic elastomer project is about to hit the ground, and the application field may be the first to make a breakthrough in shared bikes. The company's new thermoplastic elastomer project is mainly TPAE and SBC products, through years of independent + commissioned research and development, has completed the technical reserve, the technical level of international leadership. The construction period of the project is 1.5 years, and it is expected to reach the state of use in June 2017. At present, the additional items have been approved by the CSRC, and the funds needed for the project are expected to be in place soon. TPAE products have many excellent properties, such as temperature resistance, wear resistance, high strength, adjustable hardness, safety and so on, and compared with other similar products (such as SEBS), the company's products are more cost-effective, and are expected to be widely used in sharing bicycles, medical and other fields, and can replace PVC soft materials, has a broad market space. Through accounting, we can contribute 15600 tons of demand by sharing bicycles alone in 17 years. Bike sharing is expected to become an important demand market for the company's TPAE products. At the same time, the company can further expand the scope of application of products by reducing costs, and is expected to gradually open the domestic market in other fields and gradually realize import substitution. The project is estimated to be in use from June to July 2017, with an average annual sales income of 2.96 billion yuan and an average annual profit of about 1 billion yuan, which will greatly enhance the company's profitability.
Invest in the construction of "high-performance functional polypropylene film trial production project", or used in securities. The company plans to use its own funds to invest 100 million yuan to build a "high-performance polypropylene film trial production project". The commissioning of this project will help the company to further upgrade its business structure and provide new profit growth poles. At present, the company has announced more than 10 related patents. According to our analysis of the company's patents, this project is used for bills, securities, printed matter and packaging materials, and its performance is similar to that of plastic banknotes. During the "two sessions" this year, two deputy governors of the central bank said that China will issue plastic banknotes, and the research and development of plastic banknotes is ahead of schedule. We believe that the issuance of plastic banknotes has risen to the national level, and China has completed the technical reserve of plastic banknotes, and the full issuance of plastic banknotes is worth looking forward to. The most important part of plastic banknotes is the plastic substrate. According to our calculation, the demand for plastic substrates is as high as 72000 tons and the market space is as high as 20 billion. Zhejiang Zhongcheng polypropylene film or used as a plastic substrate, is expected to become the only beneficiary of the A stock market.
Profit forecast and rating: considering the issuance of mergers and acquisitions, the company's EPS in 2016-2018 is expected to be 0.12,0.17,0.75 yuan respectively, and the corresponding dynamic PE is 173,117,27 times respectively, maintaining the "buy" rating with a target price of 31.00 yuan.
Risk hints: the risk that downstream demand is lower than expected; the risk that thermoplastic high elastomer project progress and gross profit margin are not as expected; and the lower-than-expected wind of high-performance functional polypropylene film trial project.