Main points of investment:
Focus on viscose staple fiber production, comprehensive strength industry leading. The company has nearly 50 years of viscose fiber production experience, the comprehensive strength is in the forefront of the industry. The main products are viscose filament and viscose staple fiber. At present, it has a production capacity of 80,000 tons of viscose staple fiber, 20,000 tons of viscose filament production capacity, and 30% equity of Lanjing (Nanjing). The production capacity of viscose staple fiber is 160000 tons. In the first three quarters of 2016, the company achieved revenue of 1.139 billion yuan, down 0.72% from the same period last year; net profit attributable to 56.9079 million yuan, down 87.61% from the same period last year, achieving EPS0.18 yuan; the larger decline in revenue and profit was mainly due to the higher income from long-term equity investment in the disposal of Jinling real estate in the third quarter of last year.
Stripping the real estate business to focus on viscose production, the company is the industry's largest elastic target. In order to implement the requirement that "state-owned enterprises will no longer participate in commercial housing development in principle", the company formally spun off its real estate development business in August 2015 and focused on the main business of viscose fiber. In 2015, viscose staple fiber sales were 74800 tons, an increase of 87.47% over the same period last year, and revenue was 780 million yuan, an increase of 74.15% over the same period last year. At the same time, with the continuous implementation of the localization strategy, Lanjing Nanjing, which is jointly invested by the company and the Austrian Lanjing Group, has gradually improved in recent years, with a revenue of 1.833 billion yuan and a net profit of 2.9306 million yuan in 2015. Austrian Lanjing Group, as the largest cellulose manufacturer in the world, has cooperated with it to continuously improve the product quality of viscose fiber and optimize the industrial structure.
The price of viscose staple fiber has stabilized and rebounded, and the boom is promising to 2018. Since October 2016, as the downstream has entered the off-season, the price of viscose staple fiber has begun to fall, from a high of 17,000 yuan / ton to about 15,000 yuan / ton. Recently, the market atmosphere of viscose staple fiber has improved, product prices have stabilized and rebounded, and industry inventory has re-entered the decline band, returning to about 7-13 days. Under the combined influence of the slowdown in the growth of new production capacity, stable demand growth and higher environmental protection requirements, the supply and demand pattern of viscose staple fiber continues to improve, and product prices are expected to rise sharply again with the advent of the peak season after the Spring Festival next year. On the other hand, the spot and futures price of cotton is close to 16,000 yuan / ton, and the stronger cotton price will also have an important support for the price of viscose staple fiber. We are optimistic that the prosperity of the viscose staple industry will continue to rise until 2018, and the profitability of related enterprises will be greatly improved next year.
The continuous progress of the reform of state-owned enterprises has brought new opportunities for transformation. After the transfer of Jinling Real Estate with 772 million yuan, the company has obtained the necessary funds for development, which is beneficial for the company to make use of technological advantages to accelerate the transformation and upgrading of viscose fiber business, and also for the company to actively participate in the new round of state-owned assets reform. the transformation of new industries and new areas provides conditions. In addition, in 2015, the group appointed Wang Chengjun, a former manager of the investment planning department of Nanjing Xingong Investment Group, as the company's director, and his rich financial investment experience will also help the company to accelerate the pace of transformation and development.
Profit forecast and investment advice. We estimate that the EPS of the company from 2016 to 2018 is 0.26,0.37 and 0.47 yuan. With reference to the valuation level of comparable companies in the industry, the current stock price corresponds to a valuation of about 35 times EPS in 2017, which is much higher than the industry average of about 17 times, covering the temporary non-rating for the first time.
Risk hint. Product quality risk, policy and regulation risk, environmental protection risk.
