Main points of investment
Lubricating oil subdivision field giant, downstream demand is expected to pick up. The company is engaged in the R & D, production and sales of all kinds of industrial lubricating oil and automotive lubricating oil products, and is one of the leading manufacturers of industrial lubricating oil products in China. The products include transformer oil, hydraulic oil, internal combustion engine oil, special solvents and other 13 categories, more than 200 specifications and models. In 2015, the revenue of transformer oil and hydraulic oil accounted for 42.7% and 16.9% of the total revenue respectively, which are the company's main industrial lubricating oil products, and the company has obvious advantages in the market segment of industrial lubricants such as transformer oil and hydraulic oil, selling 47000 tons of transformer oil in 2014. the market share is 11.1%. In recent years, with the decline of the national macroeconomic situation, the company's performance has been affected to a certain extent, but in the next few years, with the implementation of the 13th five-year Plan, the power and manufacturing industry is expected to stabilize and pick up, which will lead to a rebound in the demand for transformer oil and hydraulic oil.
High gross margin automotive lubricating oil has a broad development space in the future. The increase in the demand for automotive lubricating oil has become the main source of the total demand for lubricating oil. In 2014, the domestic demand for automotive lubricating oil reached 3.272 million tons, accounting for 53%. Internal combustion engine oil is the core variety of automotive lubricating oil. with the steady development of the automobile industry, the demand for internal combustion engine lubricating oil in our country is gradually increasing. In recent years, the company has continuously strengthened the construction of internal combustion engine oil with high gross margin, reaching 98.12 million yuan in revenue in 2015, accounting for 18.1% of revenue from 4.7% from 2011 to 2015, and the gross profit margin of gas engine oil reached 23.9% in 2015. it is 15.1 percentage points higher than transformer oil. The company will continue to strengthen the investment of internal combustion engine oil in the future, and we believe that the optimization of product structure will bring a new round of growth for the company.
Layout of high-quality lubricating oil, explore new profit growth points. In recent years, the demand for high-quality lubricating oil in China has gradually increased, accounting for 26% of the total demand of the industry. The company will promote the production, sales and brand building of high-quality lubricating oil to a strategic height, and focus on the company's future leading products. In the past 15 years, the company has raised funds for the "annual output of 60,000 tons of high-quality lubricant project", "R & D center construction project" and "marketing after-sales service network construction project". After the project is fully put into production, the overall production capacity of the company's lubricating oil products has increased from the current 122000 tons to 169000 tons, and the new production capacity is concentrated in high-quality lubricant products, which is in line with the development trend of the industry and will significantly improve the company's profitability. We expect that with the promotion of fund-raising projects and the improvement of product layout, the company's performance will be greatly improved in the future.
Profit forecast and investment advice. It is estimated that the EPS in 16-18 is 0.51,0.73 and 0.99 yuan respectively, and the corresponding dynamic PE is 86 times, 60 times and 44 times respectively. We are optimistic about the future development of the company and are rated as "overweight" for the first time.
Risk hints: the risk of large fluctuations in raw material prices; the risk of a sustained downturn in downstream demand; and the risk that the fund-raising project is not as good as expected.
