The performance was lower than expected
Danhua Technology's income in the first three quarters was 809 million yuan, an increase of 18.1% over the same period last year, and its attributable net profit was-793000 yuan. Compared with the same period, it turned into a profit of-0.001 yuan per share, which was lower than our expectations. Mainly, the government subsidized 68.98 million yuan in the same period last year to recognize non-operating income in the second quarter.
Among them, the income in the third quarter was 260 million yuan, down 2% from the same period last year, and the attributable net profit was-12.74 million yuan, turning a profit into a loss over the same period last year.
Trend of development
The focus of the company's performance growth mainly comes from the demand for ethylene glycol and oxalic acid products. The market price of ethylene glycol fell 12% in the first three quarters compared with the same period last year, although sales volume increased but profitability declined. Globally, the demand for ethylene glycol is still growing at a high speed. In 2013, the global demand for ethylene glycol increased by 12.10% compared with the same period last year to 24 million tons. China's imports of ethylene glycol are gradually increasing, rising by about 3.53 per cent to 8.24 million tons in 2013 compared with the same period last year. The annual output in 15 years is expected to be 150000 tons, an increase of 18% over the same period last year.
Oxalic acid profitability continues to improve, the company per ton oxalic acid production cost of 1700, ton gross profit of about 2700 yuan. The oxalic acid industry belongs to the industry of high pollution and high energy consumption. With the substantial increase in the threshold of domestic environmental protection, the small factories of non-standard oxalic acid continue to shut down, the oxalic acid industry is improving, and the competitiveness of large factories with the advantages of scale and environmental protection continues to improve. The annual output of oxalic acid is expected to be 50,000 tons.
Profit forecast
Maintain the company's 15ax 16-year performance forecast, EPS 0.07max 0.25 unchanged, the current share price is corresponding to 16-year Pax E 36x.
Valuation and suggestion
The "neutral" rating and the A-share list price remain unchanged at 9.2 yuan, while the B-share price remains unchanged at US $0.7, corresponding to the 16-year Pamp E 37x.
Risk
The operating rate of coal to ethylene glycol is unstable, and the private additional issuance plan is not approved.
